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Ch02 slide show - 1 Chapter 2 Financial Statements, Cash...

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Unformatted text preview: 1 Chapter 2 Financial Statements, Cash Flow, and Taxes 2 Topics in Chapter Income statement Balance sheet Statement of cash flows Free cash flow MVA and EVA Corporate taxes Personal taxes 3 Value = + + + FCF 1 FCF 2 FCF ∞ (1 + WACC) 1 (1 + WACC) ∞ (1 + WACC) 2 4 Income Statement 2009 2010 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) 5 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. 6 Balance Sheet: Assets 2009 2010 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 7 Effect of Expansion on Assets Net fixed assets almost tripled in size. AR and inventory almost doubled. Cash and short-term investments fell. 8 Balance Sheet: Liabilities & Equity 2009 2010 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 Common stock 460,000 460,000 Ret. earnings 203,768 97,632 Total equity 663,768 557,632 Total L&E $1,468,800 $2,886,592 9 What effect did the expansion have on liabilities & equity? CL increased as creditors and suppliers “financed” part of the expansion. Long-term debt increased to help finance the expansion. The company didn’t issue any stock. Retained earnings fell, due to the year’s negative net income and dividend payment. 10 Statement of Cash Flows: 2010 Operating Activities Net Income ($ 95,136) Adjustments: Depreciation 116,960 Change in AR (280,960) Change in inventories (572,160) Change in AP 178,400 Change in accruals 148,960 Net cash provided (used) by ops. ($503,936) 11 Investing Activities Cash used to acquire FA ($711,950) Change in S-T invest. 28,600 Net cash prov. (used) by inv. act. ($683,350) 12...
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This note was uploaded on 02/02/2011 for the course FINC 350 taught by Professor Johnson during the Spring '11 term at UCLA.

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Ch02 slide show - 1 Chapter 2 Financial Statements, Cash...

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