m3l7 - David Robinson D. Robinson, 2011 Fall 2011 Module 3...

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Unformatted text preview: David Robinson D. Robinson, 2011 Fall 2011 Module 3 Accounting & Finance Lecture 7: Statement of Cash Flows Auditing Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business Income St. Balance Sheet St. Cash Flows Lecture Outline 1. Why we need the Statement of cash flows 2. Auditing: What it is, why its important 3. Audit failures of the late 1990s 4. Sarbanes-Oxley Act as a response 5. Common sense and auditing 6. Take accounting entries seriously Why we need the Statement of Cash Flows 22 Format for the Income Statement Revenues Net sales-Expenses COGS------------- Gross profit-Depreciation-SG&A-Interest Income (Profit) Tax (Corporate Income Tax) Net Income ( Bottom line ) Before tax Net Income/number of shares = Earnings per share Format of the Balance Sheet 1. Assets a. Current Assets b. Fixed (or long-term) assets 2. Liabilities a. Current Liabilities b. Long-term Liabilities 3. Owners Equity We cant see if/where dividends were paid, or if and how we raised new money from just the Income St. & Balance Sheet Statement of Cash Flows 1 . Cash flows from operations a. + our income b. - building up inventory, more money owed to the firm 2. Investing a. + sale of investments or equipment b. - buying long term PPE 3. Financing a. + Money from stock and bond sales b.- Dividends paid, bonds paid off Adding Back Depreciation 1 . Cash flows from operations a. + our income + this years depreciation shown on the Income Statement b. - building up inventory, more money owed to the firm Why? Its a non-cash expense Adding Back Depreciation 1 . Cash flows from operations a. + our income + this years depreciation shown on the Income Statement b. - building up inventory, more money owed to the firm Why? Its a non-cash expense Accumulated Depreciation End of Year Depreciation Accumulated Depreciation Net asset value (Book Value) 1 $3,000 $3,000 $12,000 2 $3,000 $6,000 $9,000 3 $3,000 $9,000 $6,000 4 $3,000 $12,000 $3,000 5 $3,000 $15,000 $ -0- $3,000 is expensed each year In Yr 2, whom did we write the check for $3,000 to? Accumulated Depreciation...
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This note was uploaded on 04/04/2012 for the course UGBA 10 taught by Professor Xuanmingsu during the Fall '08 term at University of California, Berkeley.

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m3l7 - David Robinson D. Robinson, 2011 Fall 2011 Module 3...

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