Ch2 - Ch2 FinancialStatements,Taxes,and CashFlow 1...

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1 Ch 2 Financial Statements, Taxes, and  Cash Flow 
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2 Issues in Ch.2  Three financial statements Balance sheet Income statement Operating cash flow The difference between accounting income and  cash flow in financial decision-making process  The difference between accounting value (or  book value) and market value of the firm Taxes
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3 Three Financial Statements Balance Sheet Income Statement Cash Flow Statement
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4 Accounting identity Assets = Liabilities + Shareholders’ equity Or Shareholders’ equity = Assets – Liabilities Another name for Shareholders’ equity is   “residual claim.”
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5 Balance Sheet The  Balance Sheet  is snap shot of the  firm s current condition The  asset side  of the balance sheet  reflects the investment decisions made by  the firm The  liabilities and equity side  reflect all of  the financing decisions made over the  same period
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6 Balance Sheet
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7 Balance Sheet of The firm (Snap Shot of the  Firm) Current Assets have a life of less than 1 year and include: Cash Account receivable Inventory Current Liabilities have a life of less than 1 year and include: Short-term liability Accounts Payable CA - CL Shareholders’ Equity = Assets - Liabilities Assets = Liabilities + Shareholders’ Equity Bank loans Long-term borrowings Machine, Equipment Patents
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8 Pop Quiz – Can you link them? Accounts Receivable Long-term assets Patents Notes payable Accounts payable Long-term debt Common stock Retained earnings Net income minus dividend Intellectual property Loans the firm took and must  pay back within one year Long-term borrowings Money owed to the firm by its  customers Money the firm owes to its  supplier Equipment, plant Amount of stock issued by the  firm
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9 Please construct for Bobcats Co. the following  statements using the information below: Balance sheet Income statement Operating Cash Flow (OCF)  Accounts Payable  = $70,000 Tax Rate = 34% Retained Earnings  = $100,000 Interest Expense = $10,000 Inventory = $50,000 Depreciation Expense = $100,000 Notes Payable = $80,000 Sales  = $800,000 Machinery, Buildings (net)= $400,000 Long-Term Debt = $200,000 Cash  = $30,000 Cost of Goods Sold  =$400,000 Patents, Trademarks =$150,000 Accounts Receivable  = $20,000 Operating Expense  = $100,000 Common Stock  = ? Stock price  = $20 per share Number of outstanding stocks = 20,000 shares
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10 Put the balance sheet below.
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This note was uploaded on 02/28/2012 for the course FIN 3313 taught by Professor Yi during the Spring '12 term at Texas State.

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Ch2 - Ch2 FinancialStatements,Taxes,and CashFlow 1...

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