Lecture 05 - 20 Business Finance Lecture 5 Review of the Previous Lecture Firm and the Financial Markets Primary vs Secondary Market Dealer

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Unformatted text preview: 20 Business Finance Lecture 5 Review of the Previous Lecture ¡ Firm and the Financial Markets ¡ Primary vs. Secondary Market ¡ Dealer vs. Auction Market ¡ Financial Statements ¡ Balance Sheet ¡ Assets ¡ Liabilities and Owners Equity ¡ Liquidity ¡ Working Capital ¡ Market Value vs. Book Value Topics under Discussion ¡ Income Statement ¡ Generally Accepted Accounting Principles (GAAP) ¡ Non-cash Items ¡ Time and Costs ¡ Taxes The Income Statement ¡ If we think of the balance sheet as a snapshot then we can think of income statement as a video recording covering before and after the picture. ¡ The income statement measures performance over a specific period of time. ¡ The accounting definition of income is Revenue – Expenses ≡ Income 21 XYZ Corporation Income Statement XYZ Corporation Income Statement (in $ millions) 20X2 Income Statement XYZ CORPORATION Total operating revenues Cost of goods sold Selling, general, and administrative expenses Depreciation Operating income Other income Earnings before interest and taxes Interest expense Pretax income Taxes Current: $71 Deferred: $13 Net income Retained earnings: $43 Dividends: $43 The operations section of the income statement reports the firm’s revenues and expenses from principal operations $2,262- 1,655- 327- 90 $190 29 $219- 49 $170- 84 $86 (in $ millions) 20X2 Income Statement XYZ CORPORATION Total operating revenues Cost of goods sold Selling, general, and administrative expenses Depreciation Operating income Other income Earnings before interest and taxes Interest expense Pretax income Taxes Current: $71 Deferred: $13 Net income Retained earnings: $43 Dividends: $43 The non- operating section of the income statement includes all financing costs, such as interest expense. $2,262- 1,655- 327- 90 $190 29 $219- 49 $170- 84 $86 22 XYZ Corporation Income Statement XYZ Corporation Income Statement (in $ millions) 20X2 Income Statement XYZ CORPORATION Total operating revenues Cost of goods sold Selling, general, and administrative expenses...
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This note was uploaded on 08/04/2011 for the course ACCT 501 taught by Professor Na during the Spring '11 term at Virtual University of Pakistan.

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Lecture 05 - 20 Business Finance Lecture 5 Review of the Previous Lecture Firm and the Financial Markets Primary vs Secondary Market Dealer

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