MGMT 340 Chapter 7 ppt0 - Chapter7 AccountingforFinancial...

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1 Chapter 7 Accounting for Financial  Management
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2 Topics in Chapter Income statement Balance sheet Statement of cash flows Accounting income versus cash flow MVA and EVA Corporate taxes
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3 Income Statement 2008 2009 Sales $3,432,000  $5,834,400  COGS 2,864,000  4,980,000  Other expenses 340,000  720,000  Deprec. 18,900   116,960      Tot. op. costs 3,222,900   5,816,960      EBIT 209,100  17,440  Int. expense 62,500   176,000      EBT 146,600  (158,560) Taxes (40%) 58,640   (63,424) Net income $    87,960   ($   95,136)
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4 What happened to sales and  net income? Sales increased by over $2.4 million. Costs shot up by more than sales. Net income was negative. However, the firm received a tax refund  since it paid taxes of more than $63,424  during the past two years.
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5 Balance Sheet: Assets 2008 2009 Cash $        9,000  $       7,282  S-T invest. 48,600  20,000  AR 351,200  632,160  Inventories 715,200   1,287,360      Total CA 1,124,000  1,946,802  Gross FA 491,000  1,202,950  Less: Depr. 146,200   263,160      Net FA 344,800  939,790  Total assets $1,468,800   $2,886,592  
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6 Effect of Expansion on Assets Net fixed assets almost tripled in size. AR and inventory almost doubled. Cash and short-term investments fell.
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7 Statement of Retained  Earnings, 2009 Balance of ret. earnings,  12/31/2008 $203,76 8       Add:  Net income, 2009 (95,136)    Less: Dividends paid, 2009 (11,000) Balance of ret. earnings,  12/31/2009 $97,632  
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8 Equity 2008 2009 Accts. payable $   145,600  $   324,000  Notes payable 200,000  720,000  Accruals 136,000   284,960      Total CL 481,600  1,328,960  Long-term debt 323,432  1,000,000 
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MGMT 340 Chapter 7 ppt0 - Chapter7 AccountingforFinancial...

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