BCOR 2200 Chapter 2 w cq - Chapter2 FinancialStatements...

Info icon This preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 2 Financial Statements, Taxes and Cash Flows 1
Image of page 1

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

View Full Document Right Arrow Icon
Chapter Outline 2.1  The Balance Sheet 2.2  The Income Statement 2.3  Taxes 2.4  Cash Flows 2
Image of page 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
Image of page 3

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

View Full Document Right Arrow Icon
2.1 Balance Sheet Assets are listed from Most Liquid  to Least Liquid What does liquid mean? “Net Fixed Assets” is Book Value (LOCOM) net of Accumulated  Depreciation Assets = Liabilities + OE   OE = Assets - Liabilities 4
Image of page 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 is left for the owners? called the  residual The  LEFT SIDE  shows what assets are  employed by the firm to do what it does Cash, Inventory, 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 .
Image of page 5

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

View Full Document Right Arrow Icon
6 Balance Sheet (Continued 2) Debt is also called  Financial 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 is on books at cost But what is the market value of that 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? What kind of companies have a relatively high BM?  Low  BM?
Image of page 6
7 Clicker Question: A firm’s balance sheet shows $50 million in Total  Assets and $30 million Total Debt The firm has 1,000,000 shares of stock  outstanding at a price of $25 per share Which of the following is true? A. Book Value Equity is greater than Market Value of  Equity B. Market Value Equity is greater than Book Value of  Equity C. Book Value Equity equals Market Value of Equity D. There is not enough information to tell.
Image of page 7

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

View Full Document Right Arrow Icon
8 Clicker Answer:
Image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern