chap3 - Chapter 3 Working with Financial Statements 3-2 FIN...

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Unformatted text preview: Chapter 3 Working with Financial Statements 3-2 FIN 3716 Key Concepts and Skills Key Concepts and Skills Understand sources and uses of cash and the Statement of Cash Flows Know how to standardize financial statements for comparison purposes Know how to compute and interpret important financial ratios Be able to compute and interpret the DuPont Identity Understand the problems and pitfalls in financial statement analysis 3-3 FIN 3716 Chapter Outline Chapter Outline Cash Flow and Financial Statements: A Closer Look Standardized Financial Statements Ratio Analysis The DuPont Identity Using Financial Statement Information 3-4 FIN 3716 Sample Balance Sheet Sample Balance Sheet 2007 2006 2007 2006 Cash 696 58 A/P 307 303 A/R 956 992 N/P 26 119 Inventory 301 361 Other CL 1,662 1,353 Other CA 303 264 Total CL 1,995 1,775 Total CA 2,256 1,675 LT Debt 843 1,091 Net FA 3,138 3,358 C/S 2,556 2,167 Total Assets 5,394 5,033 Total Liab. & Equity 5,394 5,033 Numbers in millions 3-5 FIN 3716 Sample Income Statement Sample Income Statement Revenues 5,000 Cost of Goods Sold (2,006) Expenses (1,740) Depreciation (116) EBIT 1,138 Interest Expense (7) Taxable Income 1,131 Taxes (442) Net Income 689 EPS 3.61 Dividends per share 1.08 Numbers in millions, except EPS & DPS 3-6 FIN 3716 Sources and Uses Sources and Uses Sources Cash inflow occurs when we sell something Decrease in asset account ( Sample B/S ) Accounts receivable, inventory, and net fixed assets Increase in liability or equity account Accounts payable, other current liabilities, and common stock Uses Cash outflow occurs when we buy something Increase in asset account Cash and other current assets Decrease in liability or equity account Notes payable and long-term debt 3-7 FIN 3716 Statement of Cash Flows Statement of Cash Flows Statement that summarizes the sources and uses of cash Changes divided into three major categories Operating Activity includes net income and changes in most current accounts Investment Activity includes changes in fixed assets Financing Activity includes changes in notes payable, long-term debt, and equity accounts as well as dividends 3-8 FIN 3716 Sample Statement of Cash Flows Sample Statement of Cash Flows Cash, beginning of year 58 Financing Activity Operating Activity Decrease in Notes Payable-93 Net Income 689 Decrease in LT Debt-248 Plus: Depreciation 116 Decrease in C/S (minus RE)-94 Decrease in A/R 36 Dividends Paid-206 Decrease in Inventory 60 Net Cash from Financing-641 Increase in A/P 4 Net Increase in Cash 638 Increase in Other CL 309 Cash End of Year 696 Less: Increase in other CA-39 Net Cash from Operations 1,175 Investment Activity Sale of Fixed Assets 104 Net Cash from Investments 104 Numbers in millions 3-9...
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This note was uploaded on 12/14/2010 for the course FIN 3716 taught by Professor Fang during the Fall '10 term at LSU.

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chap3 - Chapter 3 Working with Financial Statements 3-2 FIN...

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