Eng 111- Week 2 Discussion

Eng 111- Week 2 Discussion - Discussion Sheet 2 10/07/2011...

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Discussion Sheet 2 10/07/2011 Week 2: Interpreting Accounting Statements TA: Ravichandran Ramakrishnan Key Principal : Accounting rules often lead to a mismatch between the true cash flow of a firm and its accounting revenue. For example revenue is recognized when a good is sold. That means something sold on credit counts as a sale despite no cash being received. Thus to get a better understanding of a company’s statements we need to calculate the cash flow (the actual benefit to investors.) Example Corp. Income Statement Operating Revenues 20 0 Cost of Goods Sold 75 Selling, General, and Admin Costs 45 Depreciation 50 Other Income 40 Earnings Before Interest and Taxes 70 Interest Expense 25 Taxes 15 Net Income 30 Example Corp. Balance Sheet Assets 2010 2009 Current Assets 50 40 Fixed Assets 200 190 Other Assets 30 30 Total Assets 280 260 Liabilities Current Liabilities 20 10 Long-Term Liabilities 100 90 Total Liabilities 120 100 Equity Common Stock 100 100 Retained Earnings 60 60 Total Equity
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This note was uploaded on 12/05/2011 for the course ENGINEERIN 111 taught by Professor Melihabulu-taciroglu during the Fall '11 term at UCLA.

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Eng 111- Week 2 Discussion - Discussion Sheet 2 10/07/2011...

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