Wallace 3e - Ch. 13.pptx - Financial Accounting for...

This preview shows 1 out of 8 pages.

3e Financial Accounting for Undergraduates © Cambridge Business Publishers CHAPTER 13 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS
Image of page 1

Subscribe to view the full document.

Earnings Persistence © Cambridge Business Publishers 2 An important role for accounting information is to predict future cash flows used in valuation studies. An important determinant of earning’s ability to predict future cash flows is the persistence of earnings. Persistent earnings are earnings that are expected to continue into the future. Transitory earnings are single-period events.
Image of page 2
Multi-Step Income Statement © Cambridge Business Publishers 3 The multi-step income statement is organized to present earnings information that separates items according to persistence, with more persistent items appearing higher in the statement.
Image of page 3

Subscribe to view the full document.

Transitory Items © Cambridge Business Publishers 4 Discontinued operations are reported separately when a company sells, abandons, or otherwise disposes of a segment of its operations. The income or loss from the segment’s operation for the portion of the year before its discontinuance. Any gain or loss from the disposal of the segment.
Image of page 4
Analytical Techniques © Cambridge Business Publishers 5 Simply knowing the dollar level of financial statement items is insufficient without more information. Techniques that can aid in analysis include: Horizontal (trend) analysis Vertical (common-size) analysis Ratio analysis
Image of page 5

Subscribe to view the full document.

Coffee Roasters, Co. © Cambridge Business Publishers 6 (in thousands) 2016 2015 Assets Current Assets Cash and cash equivalents $71,173 $40,512 Net receivables 448,327 364,810 Inventory 768,437 672,248 Other current assets 35,019 53,957 Total Current Assets 1,322,956 1,131,527 Property, plant and equipment 944,296 699,802 Goodwill 808,076 789,305 Intangible assets 498,352 529,494 Other long term assets 42,109 47,759 Total Assets $3,615,789 $3,197,887 Liabilities Current Liabilities Accounts payable $480,594 $410,751 Other current liabilities 39,393 60,623 Total Current Liabilities 519,987 471,374 Long-term liabilities 824,670 793,264 Total Liabilities 1,344,657 1,264,638 Stockholders’ Equity Common stock 1,499,932 1,521,522 Retained earnings 771,200 411,727 (in thousands) 2016 2015 Net sales $3,859,198 $2,650,899 Cost of goods sold 2,589,799 1,746,274 Gross profit 1,269,399 904,625 Selling and operating expenses 481,493 348,696 General and administrative expenses 219,010 187,016 Operating income 568,896 368,913 Interest expense (22,983) (57,657) Other income (expense) 29,356 (10,056) Income before tax 575,269 301,200 Income tax expense 212,641 101,699 Net income $ 362,628 $ 199,501 (in thousands) 2016 2015 Operating Activities Net income $ 362,628 $199,501 Adjustments To Net Income 115,157 (198,716) Net cash flow from operating activities 477,785 785 Investing Activities Capital expenditures (401,121) (283,444) Other cash flows from investing activities 135,476 (904,228) Net cash flow from investing activities (265,645) (1,187,672) Financing activities Sale/purchase of stock (64,378) 981,472 Net borrowings (116,544) 223,325 Other cash flows from financing activities (557) 17,846 Net cash flow from financing activities (181,479) 1,222,643 Change In cash and cash equivalents $ 30,661 $35,756
Image of page 6
Comparative Financial Statements © Cambridge Business Publishers 7 Compare two or more years Often compare both dollar changes and percentage changes between years Care must be taken when comparing percentages Small numbers in the denominator Negative values
Image of page 7

Subscribe to view the full document.

Image of page 8
You've reached the end of this preview.
  • Summer '08
  • PHILIPS
  • Balance Sheet, Generally Accepted Accounting Principles, Coffee Roasters

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern