6thCh3P - CHAPTER3 FinancialStatements,Cash Flow,andTaxes...

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1 CHAPTER 3 Financial Statements, Cash  Flow, and Taxes Balance sheet  Income statement Statement of cash flows Accounting income vs. cash flow Federal tax system
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2 What’s the bottom line? Regular Financial Records: - Facilitate future predictions and decision making - Provide info on liquidity - Monitor progress of the firm - Provide required info to outsiders
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3 Balance sheet: a listing at a point in time of  the assets of a firm and claims on those  assets Income statement: summarizes the revenues  and expenses of the firm  Statement of retained earnings: states how  much has been added to owners’ equity  during a given period Assets – Liabilities = Stockholders’ Equity Basic Financial Statements
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4 Market vs. book value Amazon 2009 2008 2007 2006 BV equity 5257 2672 1197 431 # shares 444 428 416 414 Year end  price $134.52 $51.28 $92.64 $39.46 Mkt cap MV/BV 59,727 11.4X 21,948 8.2 38,538 32.2 16,336 39
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5 Gross Profit: Sales minus Cost of  Goods Sold Operating Profit: Gross Profit minus  Operating Expenses Pre-tax Profit: Operating Profit plus or  minus Non-operating Income or  Expenses Net Profit: Pre-tax profit minus taxes Profits
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6 Decreases in net assets caused by  revenue-producing activities during a  specific period. Increases in liabilities due to revenue- producing activities Cost of Goods Sold Operating Expenses Depreciation Expenses
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7 Net cash flow= Why cash flow is important: Earnings for a given period are not necessarily cash  flows Only cash flows provide the means for wealth-
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This note was uploaded on 03/02/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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6thCh3P - CHAPTER3 FinancialStatements,Cash Flow,andTaxes...

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