Day 3-Ch 2-Part 2-9.7.11

Day 3-Ch 2-Part 2-9.7.11 - BusinessManagement201 Day3

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Business Management 201 Day 3 Chapter 2: Part 2—Statement of Cash Flow September 7, 2011
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Day 3 Agenda 1) Follow Up Emails 2) Reading Quiz Problems? 3) TA Review Session Schedule — 11:00 AM-12:00 PM Thursday W210 TNRB 1) Book Assignment — Submit to Google doc by 11:59 PM on Friday,  Sept 9 1) Personal Information Sheets 2) Chapter 2 Discussion —  Quick Review of Balance Sheet & Income Statement   Part 2: Statement of Cash Flows
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Balance Sheet Assets Liabilities & Owners Equity Current Assets      Cash      Marketable Securities      Accounts Receivable      Prepaid Expenses      Inventories Fixed Assets      Land      Plant & Equipment      Less:  Depreciation Current Liabilities      Accounts Payable      Notes Payable      Accrued Salaries Long-Term Liabilities      Mortgage Debt      Debentures Owners’ Equity      Common Stock  ($1 Par)      Add’l Paid In Capital      Retained Earnings Investment Decision Financing Decision
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Income Statement Income Statement REVENUE -   Cost of Goods/Services GROSS PROFIT - Operating Expenses                                        N ET OPERATING INCOME (NOI )   or   EARNINGS BEFORE INTEREST &   TAXES  (EBIT) - Interest Expense - Income Taxes NET INCOME - Dividends on Common & Preferred Stock INCREASE IN RETAINED EARNINGS
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What’s Important:  Net Income or Cash Flow? Suppose a firm shows a $16,000  increase in the cash position from one  year to the next. Key Question for Analysts:  Where did the cash come from? Note:  Analyzing all the  sources   and  uses  of cash reveals  a lot about a firm’s health.
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Cash Flow Analysis Source  = Cash  INCREASES  (i.e. MORE cash) Analysis Examples Liabilities:  Assets: Equity: Use = Cash  DECREASES  (i.e. LESS cash) Analysis Examples Liabilities:  Assets: Equity:
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Statement of Cash Flows CASH IS KING!!! Breaks Cash Flows into THREE Sources 1) Operating 2) Investing 3) Financing
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Simplified Income Statement - 2008 Three Dudes, Inc (Assume taxes paid at enterprise level)  Revenue                 $1,400,000  -Cost of Services    (490,000)  Gross Profit    $910,000  -Operating Expenses (G&A):       (280,000) Earnings Before Interest and Taxes (EBIT)       $630,000  -Interest charges:       (27,000)       Earnings before taxes (EBT)    $603,000  -Taxes   ($271,350)  Net Income        $331,650
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Assets:   Liabilities & Owners' Equity: 2008          2007 2008             2007     Cash 32,000         16,000 Accts Pay 32,000             28,000     Accts. Rec. 225,000         200,000 Notes Pay  30,000             30,000    Inventories 27,000         29,000 Other CL 22,000             22,000     Total CA 284,000         245,000 Total CL 84,000
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Day 3-Ch 2-Part 2-9.7.11 - BusinessManagement201 Day3

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