slides02 - 2. Financial statements and cash flow • A...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2. Financial statements and cash flow • A quick review of balance sheet and income statement. Top- ics include: – the balance sheet identity – market value vs book value – income statement vs cash flow • We will also discuss the components of financial cash flows. The fundamental identies are: cash flow from assets = cash flow to creditors + cash flow to stockholders cash flow from assets = operating cash flow – net capital spending – change in net working capital Figure — Balance sheet See Dell 2005 10-K 2 Balance sheet • The balance sheet summarizes the financial position of a firm at a point in time . • Assets are on the left, liabilities on the right. Listed in order of decreasing liquidity. • Liquidity refers to how easily (and quickly) something can be converted to cash. Note that anything can be sold quickly, but the cost of selling quickly may be high. • Current assets (or liabilities) are assets (or liabilities) with an expected time to conversion to cash of one year or less . • Accounts receivable are payments due from the firm’s cus- tomers. • Accounts payable are payments owed to the firm’s suppli- ers. • Fixed assets are equal to purchase price less depreciation. • Owners’ equity reflects the price at which shares were orig- inally sold (or repurchased). 3 Balance sheet For the purposes of this course, we will typically use a simplified balance sheet similar to the following: 4 U.S. Composite Corporation Balance sheet 2007 and 2006 ($ in millions) Assets 2007 2006 Current assets: Cash and equivalents 140 107 Accounts receivable 294 270 Inventories 269 280 Other 58 50 Total current assets 761 707 Fixed assets: Property, plant and equipment 1423 1274 Less accumulated depreciation (550) (460) Net property, plant and equipment 873 814 Intagible assets and others 245 221 Total fixed assets 1118 1035 Total assets 1879 1742 5 Liabilities and Stockholder’s Equity 2007 2006 Current liabilities: Accounts payable 213 197 Notes payable 50 53 Accrued expenses 223 205 Total current liabilities 486 455 Long-term liabilities Deferred taxes 117 104 Long-term debt 471 458 Total long-term liabilities 588 562 Stockholder’s equity Preferred stock 39 39 Common stock ($1 par value) 55 32 Capital surplus 347 327 Accumulated retained earnings 390 347 Less treasury stock (26) (20) Total equity 805 725 Total liabilities and stockholder’s equity 1879 1742 Notes: • The increase in long-term debt reflects the difference between $86 mil- lion in new debt and $73 million in retired old debt. • The increase in treasury stock reflects the repurchase of $6 million in common stock (at market value). • The change in common stock reflects the issuance of 23 million shares of stock at par value of $1 per share....
View Full Document

This note was uploaded on 03/31/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Fall '07 term at Colorado.

Page1 / 31

slides02 - 2. Financial statements and cash flow • A...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online