IFM9 Ch 07 Show

IFM9 Ch 07 Show - Chapter 7 Accounting for Financial...

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  1 Chapter 7 Accounting for  Financial Management
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  2 Topics in Chapter Income statement Balance sheet Statement of cash flows Accounting income versus cash flow MVA and EVA Personal taxes Corporate taxes
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  3 Income Statement 2005 2006 Sales 3,432,000  5,834,400  COGS 2,864,000  4,980,000  Other expenses 340,000  720,000  Deprec. 18,900   116,960      Tot. op. costs 3,222,900   5,816,960      EBIT 209,100  17,440  Int. expense 62,500   176,000      EBT 146,600  (158,560) Taxes (40%) 58,640   (63,424) Net income 87,960   (95,136)
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  4 What happened to sales and  net income? Sales increased by over $2.4 million. Costs shot up by more than sales. Net income was negative. However, the firm received a tax refund  since it paid taxes of more than $63,424  during the past two years.
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  5 Balance Sheet: Assets 2005 2006 Cash 9,000  7,282  S-T invest. 48,600  20,000  AR 351,200  632,160  Inventories 715,200   1,287,360      Total CA 1,124,000  1,946,802  Gross FA 491,000  1,202,950  Less: Depr. 146,200   263,160      Net FA 344,800  939,790  Total assets 1,468,800   2,886,592  
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  6 Effect of Expansion on Assets Net fixed assets almost tripled in size. AR and inventory almost doubled. Cash and short-term investments fell.
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  7 Statement of Retained  Earnings, 2006 Balance of ret. earnings,  12/31/2005 203,768       Add:  Net income, 2006 (95,136)    Less: Dividends paid, 2006 (11,000) Balance of ret. earnings,  12/31/2006 97,632  
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  8 Equity 2005 2006 Accts. payable 145,600  324,000  Notes payable 200,000  720,000  Accruals 136,000   284,960      Total CL 481,600  1,328,960  Long-term debt 323,432  1,000,000  Common stock 460,000  460,000  Ret. earnings 203,768   97,632      Total equity 663,768  557,632  1,468,800   2,886,592  
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  9 What effect did the expansion  CL increased as creditors and suppliers  “financed” part of the expansion. Long-term debt increased to help  finance the expansion. The company didn’t issue any stock. Retained earnings fell, due to the year’s  negative net income and dividend  payment.
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10 Statement of Cash Flows:  2006 Operating Activities Net Income (95,136) Adjustments:   Depreciation 116,960    Change in AR (280,960)   Change in inventories
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This note was uploaded on 04/12/2008 for the course BUS 420 taught by Professor Poindexter during the Spring '08 term at N.C. State.

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IFM9 Ch 07 Show - Chapter 7 Accounting for Financial...

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