Income Statement (GAAP accrual)

Income Statement (GAAP accrual) - Income Statement (GAAP...

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Income Statement (GAAP accrual) 1 Revenue is recognized when earned, not collected (accrual accounting). Expenses are booked to match
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Profits vs. Cash Net income is not the same as cash flow (economic earnings). The firm earned $5,642 million, yet cash decreased by $65 million. We look to the balance sheet to reconcile changes in cash. 2
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CFFA Has Three Parts 3 Cash Flow From Assets 1 3 2 We look to the balance sheet to reconcile changes in cash. We’ll expand on 3100 concepts. The discussion so far is evaluating the past. Finance focuses on planning. Note: CFFA is also known as Free Cash Flow
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Review: Figure 1.2
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Review: Fin 3100
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Cash Flow Timeline Example 6 A brand new firm is created. The owner puts in half the money and borrows the other half. Cash 1,000 $ Debt 500 $ Stock 500 $ Total 1,000 $ Total 1,000 $ Balance Sheet - Day 1 Assets Liabilities & Net Worth
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Timeline Example 7 The next day, the firm buys a build ing Cash 1,000 $ Debt 500 $ Stock 500 $ Total 1,000 $ Total 1,000 $ Cash 400 $ Accounts Payable 300 $ Inventory 300 $ Debt 500 $ Fixed Assets 600
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This note was uploaded on 01/19/2012 for the course FIN 4260 taught by Professor Victorwakeling during the Spring '12 term at Kennesaw.

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Income Statement (GAAP accrual) - Income Statement (GAAP...

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