03 Chapter model

03 Chapter model - 03 Chapter model 3/22/2010 7:09...

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03 Chapter model 3/22/2010 7:09 2/13/2006 Chapter 3. Financial Statements, Cash Flows, and Taxes THE ANNUAL REPORT INPUT DATA SECTION: Historical Data Used in the Analysis 2005 2004 Year-end stock price $23.00 $26.00 Shares outstanding (in millions) 50 50 Tax rate 40% 40% After-tax cost of capital 10.0% 10.3% The annual report contains a verbal section plus four key statements: the balance sheet, income statement, statement of retained earnings, and statement of cash flows. These statements contain a wealth of information that is used by bankers, stock and bond analysts, and managers. Hence, they are quite important. Spreadsheets are used both to create and to analyze these statements, as we demonstrate in this model. In this model, we start with the same balance sheet and income statement that was used in the chapter, but in an Excel format, and then we show how spreadsheets can be used to analyze the data. The analysis continues to cover the statement of retained earnings, statement of cash flows, and shows how accounting data may be modified to evaluate managerial performance.
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BALANCE SHEETS - Allied Food Products - December 31 (in millions of dollars) 2005 2004 Assets Cash and equivalents $10 $80 Accounts receivable 375 315 Inventories 615 415 Total current assets $1,000 $810 Net plant and equipment 1,000 870 Total assets $2,000 $1,680 Liabilities and Equity Accounts payable $60 $30 Notes payable 110 60 Accruals 140 130 Total current liabilities $310 $220 Long-term bonds 750 580 Total debt $1,060 $800 130 130 Retained earnings 810 750 Total common equity $940 $880 Total liabilities and equity $2,000 $1,680 INCOME STATEMENTS - Allied Food Products - Years Ending December 31 (in millions of dollars) 2005 2004 Net sales $3,000.0 $2,850.0 Operating costs except depreciation 2,616.2 2,497.0 Earnings before interest, taxes, and depreciation (EBITDA)* $383.8 $353.0 Depreciation 100.0 90.0 Earnings before interest and taxes (EBIT) $283.8 $263.0 Less interest 88.0 60.0 Earnings before taxes (EBT) $195.8 $203.0 Taxes 78.3 81.2 Net income $117.5 $121.8 Common dividends $57.5 $53.0 Addition to retained earnings $60.0 $68.8 *Allied has no amortization charges. BALANCE SHEET
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This note was uploaded on 03/21/2010 for the course BUSINESS AB102 taught by Professor Woo during the Spring '10 term at Nanzan.

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03 Chapter model - 03 Chapter model 3/22/2010 7:09...

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