BH-Chapter3.ppt

BH-Chapter3.ppt - Chapter 3 Financial Statements Cash Flows...

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Chapter 3 Chapter 3 Financial Statements, Cash Flows, and Taxes Nataliya Zaiats, Ph.D.
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2 Readings BH Chapter 3: Financial Statements, Cash Flows and Taxes
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3 Outline Balance sheet Income statement Statement of retained earnings / stockholders’ equity Statement of cash flows
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4 Objectives Our Goal: Interpret financial statements Annual Report Letter to shareholders Statistical Summary Financial Statements: Balance Sheet Income Statement Statement of Cash Flows Statement of Retained Earnings All financial statements are filed with SEC:
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5 Why study financial statements To be able to value any asset, one needs to identify cash flows that the asset generates and find the present value of these cash flows using appropriate cost of capital When analyzing a corporation, accounting financial statements are often the main source of information about the firm Therefore, it is important to be able to understand financial statements and to be able to derive cash flows from them
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6 The balance sheet Definition Financial statements that show the value of the firm’s assets and liabilities, that is a snapshot of financial position at a particular point in time.
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7 The balance sheet - key items Current Assets Cash & Marketable Securities Receivables Inventories + Fixed Assets Tangible Assets Intangible Assets Current Liabilities Payables Short-term Debt + Long-term Liabilities + Shareholders’ Equity =
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