FNCE-Ch2 - Chapter 2 Financial Statements Taxes and Cash...

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 Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

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

Unformatted text preview: Chapter 2 Financial Statements, Taxes and Cash Flows 1 Chapter Outline 2.1 The Balance Sheet 2.2 The Income Statement 2.3 Taxes 2.4 Cash Flow 2 Key Concepts and Skills • Know the difference between book value and market value • Know the difference between accounting income and cash flow • Know the difference between average and marginal tax rates • Know how to determine a firm’s cash flow from its financial statements 3 2.1 Balance Sheet • Assets are listed from Most Liquid to Least Liquid • “Net Fixed Assets” is Book Value (LOCOM) net of Accumulated Depreciation • Assets = Liabilities + OE OE = Assets - Liabilities 4 5 Balance Sheet (Continued 1) • The balance sheet is a “snap-shot” – What does the company own today? – What does the company owe today? – How much do the owners “own” (called the residual ) • The left side shows what is being employed by the business to do what it does – Inventory, Cash, Factories, Machines, Trucks… • The right side shows how it paid for the assets – How much is borrowed and for how long – How much is left for the owners – Note: Owner’s Equity is not how much the owners contributed. It is the current residual value . 6 Balance Sheet (Continued 2) • Debt is also called Leverage – Given the equity, what value of assets are employed? – Put up $1m, borrow $1m, Employ $2m in assets – Put up $1m, borrow $2m, Employ $3m in assets • Market Value vs. Book Value: 1.Market Value of Assets vs. Book Value of Assets • GAAP: LOCOM • Coors in Golden: Land on books at cost • What is the market value of the land? 2.Market Value of Equity vs. Book Value of Equity • Book Value of Equity = Book Value of Assets – Liabilities • Market Value of Equity = # of Shares x Price per Share • What would account for the difference between book and market?...
View Full Document

{[ snackBarMessage ]}

Page1 / 26

FNCE-Ch2 - Chapter 2 Financial Statements Taxes and Cash...

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