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Chapter%202 - FIN3100: Chapter 2 Financial Statements and...

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FIN3100: Chapter 2 Financial Statements and Cash Flows
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Learning Objectives Know the difference between accounting income and cash flow Know how to determine a firm’s cash flow from its financial statements
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Financial Statements Two main financial statements: Balance sheet Income Statement Our focus: The process by which these statements can be used to project a firm’s future cash flows
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Balance Sheet The balance sheet is a snapshot of the firm’s assets and liabilities at a given point in time Assets are listed in order of liquidity Ease of conversion to cash Without significant loss of value Balance Sheet Identity Assets = Liabilities + Stockholders’ Equity
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Balance Sheet Identity
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The cash flow identity states that the cash flow on the left-hand side of the balance sheet is equal to the cash flow on the right-hand side of the balance sheet. CASH FLOW FROM ASSETS
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Chapter%202 - FIN3100: Chapter 2 Financial Statements and...

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