Chapter-3 - 6/8/2010 1 Financial Reporting and Taxes...

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Unformatted text preview: 6/8/2010 1 Financial Reporting and Taxes Chapter 3 Financial Reporting Process Key Financial Statements Balance Sheet & Income Statement Statement of Stockholders Equity Statement of Cash Flows Free Cash Flow Federal Tax System 3-1 External Financial Reporting Purpose Purpose : Credibly communicate decision useful information to wide variety of existing and potential investors and stakeholders Different information for different stakeholders and decisions Examples of Stakeholders (users) : Shareholders, Bankers, Government, Employees, Customers, Suppliers. Examples of Decision Contexts : Buy/Sell Shares, Lending, Regs, Unions, Credit 3-2 External Financial Reports - Types Company to Shareholder (Direct): Annual Report (Audited) Audited Financial Statements, Management Discussion and Analysis, Supplementary Disclosure Quarterly Reports (Unaudited) Financial Statements not Audited, Less detail, Timely Company to Government (SEC Filings) : Disclosure established under Securities Act of 1933 and Securities Exchange Act of 1934. 10-K is annual (audited); 10-Q is quarterly; detailed 3-3 6/8/2010 2 The Annual Report Balance sheet provides a snapshot of a firms financial position at one point in time. Income statement summarizes a firms revenues and expenses over a given period of time. Statement of stockholders equity shows how much of the firms earnings were retained, rather than paid out as dividends. Statement of cash flows reports the impact of a firms activities on cash flows over a given period of time. 3-4 Balance Sheet BASICS Assets Current Assets (See Yahoo Finance) Liabilities Current Liabilities (<1 year) Equity Common + Preferred Stock Non Current Asset Long Term Liabilitie Retained Earning Non-Current Assets Long Term Liabilities (>1 year) Retained Earnings Total Assets = Total Liabilities + Total Equity 3-5 Income Statement Format Basics Revenues Less Cost of Goods Sold = Gross Profit (Measures Basic product profits) Less Operating Expenses (SG&A Less Operating Expenses (SG&A) = Operating Income (EBIT) Less Interest and Taxes = Net Income +/- Other Stuff = Comprehensive Income 3-6 6/8/2010 3 Balance Sheet: Assets Cash A/R Inventories 2008 7,282 632,160 1,287,360 2007 57,600 351,200 715,200 Total CA Gross FA Less: Dep....
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This note was uploaded on 02/27/2011 for the course FINANCE 3320 taught by Professor Wigmans,f during the Spring '08 term at Texas Tech.

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Chapter-3 - 6/8/2010 1 Financial Reporting and Taxes...

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