Chapter 3 Powerpoint

Chapter 3 Powerpoint - CHAPTER 3 Financial Statements, Cash...

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Unformatted text preview: CHAPTER 3 Financial Statements, Cash Flow, and Taxes Financial Statements Free Cash Flow Taxes Ratio Analysis Economic Value Added FIN 3403 - Business Finance Basic Statements Financial Statements The balance sheet The income statement Statement of retained earnings Statement of cash flows Balance Sheet Assets Year 4 Year 5 Cash 29 19 Accounts Receivable 549 711 Inventory 672 873 Current Assets 1,250 1,603 Gross Fixed Assets (PPE) 230 230 Less: Accumulated Depreciation (46) (60) Net Fixed Assets (PPE) 184 170 Total Assets 1,434 1,773 Balance Sheet Liabilities and Equity Year 4 Year 5 Accounts Payable 210 214 Notes Payable 329 539 Accruals 48 45 Current Liabilities 587 798 Long-term Debt 208 258 Total Liabilities 795 1,056 Common Stock 490 520 Retained Earnings 149 197 Total Equity 639 717 Total Liabilities and Equity 1,434 1,773 Income Statement Income Statement Year 4 Year 5 Sales (Net Revenues) 2,939 3,841 Cost of Goods Sold (2,279) (2,966) Gross Profit 660 875 Other Expenses (524) (703) Depreciation (14) (14) EBIT 122 158 Interest (38) (64) EBT 84 94 Taxes (40%) (34) (38) Net Income 51 57 Other Data Most Items on Per Share Basis Year 4 Year 5 Shares Outstanding 11,909,954 12,445,668 Book Value Per Share $53.68 $57.57 Dividends Per Share $0.60 $0.75 Total Dividends (in millions) $7.1 $9.3 To Retained Earnings (in millions) $43.5 $47.2 Price Per Share $58.23 $52.74 Earnings Per Share $4.25 $4.54 P/E Ratio 13.7 11.6 Total MV of Equity $694 $656 Lease Payments (in millions) $27 $48 Questions The firm increased its net income, EPS, and dividends, yet the price of the stock dropped. Was this irrational behavior by investors? Not necessarily. Current Questions Why did management increase the dividend per share? They were probably trying to signal the market that the future is brighter than investors believe. It does not appear as if they were successful. Statement of Retained Earnings Components Year 4 Year 5 Beginning Balance 106 149 Add: Net Income 51 57 Less: Dividends Paid (7) (9) Ending Balance 149 197 Statement of Cash Flows Operations Year 4 Year 5 Operations: Net Income 51 57 Depreciation 14 14 Working Capital from Operations 65 71 (Increase) Decrease in Accounts Receivable (130) (162) (Increase) Decrease in Inventories (162) (201) Increase (Decrease) in Accounts Payable 18 4 Increase (Decrease) in Accruals 6 (3) Cash Flow from Operations (203) (291) Statement of Cash Flows Investing and Free Cash Flow Year 4 Year 5 Investing: Gross Fixed Assets (PPE) (10) Change in Marketable Securities Cash Flow from Investing (10) Free Cash Flow (213) (291) Statement of Cash Flows Financing and Ending Cash Year 4 Year 5 Financing: Increases (Decreases) in Notes Payable 44 211 Increases (Decreases) in Long-Term Debt 125 50 Sale of Common Stock 45 30 Acquisition of Treasury Stock Payment of Cash Dividends (7) (9) Cash Flow from Financing 207 281 Net Change in Cash (6) (10) Beginning Cash Balance 35 29 Ending Cash Balance 29 19 Net Cash Flow NCF = NI - NCR + Depreciation Assuming NCR = NCF = NI + Depreciation Operating Cash Flow...
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Chapter 3 Powerpoint - CHAPTER 3 Financial Statements, Cash...

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