Cash+FLow+Present+2010

Cash+FLow+Present+2010 - Financial Statements 3 Statement...

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Click to edit Master subtitle style Ray Wilson The Dickie Where did all the money go?? Financial Statements 3 Statement of Cash Flows
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1/10/11SM 121 Fall 2006 Weil Gotshal Information is Presented Through Three Financial Statements Balance Sheet Income Statement Statement of Cash Flow
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1/10/11SM 121 Fall 2006 Weil Gotshal Balance Sheet & Income Statement are on Accrual Basis Balance Sheet Income Statement Accrual Accounting Looks at Business as TRADE
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1/10/11SM 121 Fall 2006 Weil Gotshal Accrual Accounting Looks at Business as TRADE Assets, liabilities, revenues, and expenses put on financial statements when the transaction that causes them occurs , not when cash is paid or received Required by GAAP
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1/10/11SM 121 Fall 2006 Weil Gotshal A ssets (what you own ) minus L iabilities (what you owe ) = E quity Balance Sheet is a Picture of Where the Company Is if: A – L = E then: A = L + E At any single point in time A L+E
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1/10/11SM 121 Fall 2006 Weil Gotshal The Balance Sheet Equation What you own = How you paid for it Assets = Liabilities + Equity Investments in Non-owner Owner the business financing financing $$ Borrowed by the company $$ Invested by owners or $$ Earned by the company Stuff Purchased by the company At a Specific Point in Time
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1/10/11SM 121 Fall 2006 Weil Gotshal Income Statement Tells the Story for a Certain Period Revenue (what you sold to customers) Expenses (what it cost to run the company) = Net Income (what's left over for you!) Tells what happened to the company over a certain period of time
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Cash is So Important, it has it’s Own Statement n Performance over time from Cash perspective, not Accrual n Covers same period as Income Statement, but from different perspective 88 Explains change in cash balance over period of time, from one Balance Sheet to next
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Cash Flow Statement Assets Liabilities & Equity Income Statement Assets Liabilities & Equity Cash Cash Balance Sheet shows where I was Balance Sheet shows where I am now Income Statement shows how I got there Cash Flow explains how cash changed
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1/10/11SM 121 Fall 2006 Weil Gotshal The Need for a Statement of Cash Flows The statement focuses attention on: Ability to generate cash from its operations. Management of current assets and current liabilities. Expenditures for long-term assets. Amount received from external financing. The statement helps to answer these questions: l Is there enough cash to pay short- term debt? l Are accounts receivable and inventory adequately managed? l Has the company purchased sufficient equipment and other long- term assets? l Did the company generate enough cash internally to finance the purchases, or did it rely on external financing? l Is the company changing the source of its external financing?
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1/10/11SM 121 Fall 2006 Weil Gotshal ¡ Buy materials ¡ Pay for materials ¡ Produce goods ¡ Deliver goods to customer ¡ Receive payment from customer Companies Need Cash to Fund the Operating Cycle
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1/10/11SM 121 Fall 2006 Weil Gotshal {62595FCB-D595-4F9E-AEC8-28A0ADD4BE62} Investing {54924 F0-A578-4908-8C0 -2 FD108DCE2E} Financing {146F5898-2072-468A-9DB7-13 2071B38A8} Operating Operating activities: selling
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This note was uploaded on 01/09/2011 for the course SMG 121 taught by Professor Arnold during the Spring '08 term at BU.

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Cash+FLow+Present+2010 - Financial Statements 3 Statement...

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