FM11 Ch 03 Show - 3-1 CHAPTER 3 Financial Statements Cash...

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3 - 1 Balance sheet Income statement Statement of cash flows Accounting income versus cash flow MVA and EVA Personal taxes Corporate taxes CHAPTER 3 Financial Statements, Cash Flow, and Taxes
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3 - 2 Income Statement 2003 2004 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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3 - 3 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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3 - 4 Balance Sheet: Assets 2003 2004 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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3 - 5 What effect did the expansion have on the asset section of the balance sheet? Net fixed assets almost tripled in size. AR and inventory almost doubled. Cash and short-term investments fell.
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3 - 6 Statement of Retained Earnings: 2004 Balance of ret. earnings, 12/31/2003 203,768 Add: Net income, 2004 (95,136) Less: Dividends paid, 2004 (11,000) Balance of ret. earnings, 12/31/2004 97,632
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3 - 7 Balance Sheet: Liabilities & Equity 2003 2004 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 Total L&E 1,468,800 2,886,592
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3 - 8 What effect did the expansion have on liabilities & equity? 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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3 - 9 Statement of Cash Flows: 2004 Operating Activities Net Income (95,136) Adjustments: Depreciation 116,960 Change in AR (280,960) Change in inventories (572,160) Change in AP 178,400 Change in accruals 148,960 Net cash provided by ops. (503,936)
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