ActSc371_Lecture 3_Chapter 2 (Ross)

ActSc371_Lecture 3_Chapter 2 (Ross) - ActSc 371 Corporate...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 3 Sections 2.1-2.3 from Chapter 2: Introduction to Corporate Finance (Corporate Finance by Ross et al.) Selections from Chapter 28 (Principles of Corporate Finance by Brealey and Myers) ActSc 371 – Corporate Finance 1 Instructor: Dr. Lysa Porth 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Introduction Introduction to Corporate Finance 2.1 The Balance Sheet 2.2 Statement of Comprehensive Income 2.3 Net Working Capital 2
Background image of page 2
Accounting Statements and Cash Flow 2.1 The Balance Sheet Balance Sheet: an accountant’s snapshot of the firm’s accounting value on a particular date, as though the firm momentarily stood still. The balance sheet has two sides: on the left side are the assets and on the right side the liabilities and shareholders’ equity. This reflects what the firm owns and how it is financed. Assets = Liabilities + Shareholders Equity* *Remember: the shareholder’s equity is defined to be the difference between the assets and the liabilities of the firm (i.e. what the shareholders would have left after the firm discharged its obligations). 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Accounting Statements and Cash Flow 2.1 The Balance Sheet Cont’d Assets: listed in order by the length of time it normally takes to convert them to cash (liquidity). Examples of current assets: include cash itself, marketable securities and receivables (bills to be paid by the firm’s customers), and inventories of raw materials, work in process, and finished goods. Examples of long term assets: usually illiquid, assets such as office buildings. The balance sheet does not include all of the company’s assets. Some of the most valuable ones are intangible (i.e. patents, reputation, skilled management, well- trained work force, etc.) 4
Background image of page 4
Accounting Statements and Cash Flow 2.1 The Balance Sheet Cont’d Liabilities and Equities: The right-hand portion of the balance sheet shows where the money to buy the assets comes from. Listed in the order in which they must be paid. Financial managers must be aware of three concerns: accounting measures of liquidity, debt versus equity, and value versus cost. 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Accounting Statements and Cash Flow 6 The Balance Sheet of the Canadian Composite Corporation (in $ millions) 20X2 and 20X1 Balance Sheet CANADIAN COMPOSITE CORPORATION Liabilities (Debt) Assets 20X2 20X1 and Stockholder's Equity 20X2 20X1 Current assets: Current Liabilities: Cash and equivalents $140 $107 Accounts payable $213 $197 Accounts receivable 294 270 Notes payable 50 53 Inventories 269 280 Accrued expenses 223 205 Other 58 50 Total current liabilities $486 $455 Total current assets $761 $707 Long-term liabilities: Fixed assets: Deferred taxes $117 $104 Property, plant, and equipment $1,423 $1,274 Long-term debt 471 458 Less accumulated depreciation -550 -460 Total long-term liabilities $588 $562 Net property, plant, and equipment 873 814 Intangible assets and other 245 221 Stockholder's equity: Total fixed assets $1,118 $1,035 Preferred stock $39 $39 Common stock ($1 per value)
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 23

ActSc371_Lecture 3_Chapter 2 (Ross) - ActSc 371 Corporate...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online