chap03 - Chapter 3 & Web Appendix 3A Financial...

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    Financial Statements, Cash Flows, and  Taxes 
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    Topic Overview Key Financial Statements (See Best Buy  Spreadsheet for Example) Balance sheet Income statements  Statement of retained earnings Statement of cash flows  Accounting Income vs. Cash Flow Statement of Cash Flows Individual and Corporate Income Taxes
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    The annual report Balance sheet – provides a snapshot of a firm’s  financial position at one point in time.  (Please review  section 3.3) Income statement – summarizes a firm’s revenues  and expenses over a given period of time.  (Please  review section 3.4) Statement of retained earnings – shows how much  of the firm’s earnings were retained, rather than  paid out as dividends.  (Please review section 3.7) Statement of cash flows – reports the impact of a  firm’s activities on cash flows over a given period of  time.
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    2006 2005 2006-2005 Assets Current  Assets 900 800 100 Net Fixed  Assets 1500 1300 200 Total  Assets 2400 2100
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    Homer & Son Balance Sheet: Liabilities Liabilities 2006 2005 2006-2005 Acct Pay 450 350 100 Accruals 200 150 50 Notes  Payable 150 150 Total CL 800 650 Long-term  Debt 600 600 Total Liab 1400 1250
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    Homer & Son Balance Sheet: Equity and Total Liabilities and Equity 2006 2005 Total Liab 1400 1250 Common  Stock 700 700 Retained  Earnings 300 150 Total Equity 1000 850 Equity 2400 2100
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    Sales 3000 Cost of good sold 1800 Gross Profit 1200 SGA Expense 720 Depreciation 100 Operating Inc. 380 Interest Exp 80 EBT 300 Taxes (40%) 120 Net Income 180
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    Some Balance Sheet Comments Net Working Capital = Current Assets – Current  Liabilities Assets (particularly Long-term) and Equity on  Balance Sheet are Book (or historical-based)  Values. Market Value of Assets and Equity (# of shares 
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This note was uploaded on 02/27/2009 for the course FIN 221 taught by Professor Dyer during the Fall '08 term at University of Illinois at Urbana–Champaign.

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chap03 - Chapter 3 & Web Appendix 3A Financial...

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