Lecture07 2011 09 28 PostClass

Lecture07 2011 09 28 PostClass - Lecture 7 Statement of...

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Lecture 7 Statement of Cash Flows
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Announcements • HW #1 is electronic and is live on webCafe • Due 10/5 9 AM • Multiple attempts permitted • Last attempt will be graded • Problems for recitation this week: 4-31, 4-34, 4-43 5-32 , 5-44, 5-46, 5-47
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Goals of Today’s Class • Understand the three sections of the Statement of Cash Flow • Learn how the Statement of Cash Flow is Prepared
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Purpose of the Statement of Cash Flows To report about how the entire firm’s operating, investing, and financing activities have affected its cash balances during the period covered by the statement In this context, “Cash” is defined as cash balances plus marketable securities with maturities of three months or less he cash flow statement should display all of the cash inflows The cash flow statement should display all of the cash inflows within each of the three categories 1. Operations 2. Investing 3. Financing Note: Information on cash flow statement is not “new” over and above balance sheet and income statement – Its value comes from the way information is organized
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Consolidated Statement of Income In millions, except per share data Year ended 2009 REVENUES Sales by Company-operated restaurants $15,458.5 Revenues from franchised restaurants 7,286.2 Total revenues 22,744.7 OPERATING COSTS AND EXPENSES Company-operated restaurant expenses Food & paper 5,178.0 Consolidated Balance Sheet Cash and equivalents 2009 2008 $ 1,796.0 $ 2,063.4 Net Income ($4,551.0) ≠ change in Cash (-$267.4) Why? McDonald’s 10K Report December 31, 2009 Payroll & employee benefits 3,965.6 Occupancy & other operating expenses 3,507.6 Franchised restaurants–occupancy expenses 1,301.7 Selling, general & administrative expenses 2,234.2 Impairment and other charges (credits), net (61.1) Other operating (income) expense, net (222.3) Total operating costs and expenses 15,903.7 Operating income 6,841.0 Interest expense–net of capitalized interest of $11.7, $12.3 and $6.9 473.2 Nonoperating (income) expense, net (24.3) Gain on sale of investment (94.9) Income from continuing operations before provision for income taxes 6,487.0 Provision for income taxes 1,936.0 Income from continuing operations 4,551.0 Income from discontinued operations (net of taxes of $34.5) Net Income $ 4,551.0
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Differences between Change in Cash and Net Income Net Income almost never reflects the actual change in cash-on-hand Accruals change net income without changing cash For example, depreciation expense lowers net income with no related change to cash-on-hand Purchases and sales can change cash without changing net income For example, purchasing equipment for cash lowers the cash balance but it does not immediately change net income btaining or paying off debt can change cash without changing net income Obtaining or paying off debt can change cash without changing net income For example, obtaining a new loan will increase cash without an immediate change in net income Issuing or repurchasing equity can change cash without changing net income For example, repurchasing Treasury Stock will decrease cash without a change in net income
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This note was uploaded on 10/26/2011 for the course ASDF 2342 taught by Professor 2adga during the Spring '11 term at Mansfield University of Pennsylvania.

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Lecture07 2011 09 28 PostClass - Lecture 7 Statement of...

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