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Accounts as well as dividends as 7 sample statement

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Unformatted text preview: sh Sample Flows Flows Numbers in millions Cash, beginning of year 58 Operating Activity Financing Activity Decrease in Notes Payable Decrease Net Income Net 689 Decrease in LT Debt Decrease Plus: Depreciation Plus: 116 -93 Decrease in C/S (minus RE) Decrease Decrease in A/R Decrease 36 Decrease in Inventory Decrease 60 Increase in A/P Increase 4 Increase in Other CL Increase 309 Less: Increase in other CA Less: Net Cash from Financing Net -94 -206 -641 Net Increase in Cash 638 Cash End of Year 696 -39 Net Cash from Operations Net Dividends Paid Dividends -248 1,175 Investment Activity Sale of Fixed Assets Sale Net Cash from Investments Net 104 104 8 Standardized Financial Standardized Statements Statements Common-Size Balance Sheets Common-Size Income Statements Compute all accounts as a percent of total assets Compute all line items as a percent of sales Standardized statements make it easier to compare Standardized financial information, particularly as the company grows financial They are also useful for comparing companies of different They sizes, particularly within the same industry sizes, 9 Ratio Analysis Ratios also allow for better comparison through Ratios time or between companies time As we look at each ratio, ask yourself what the As ratio is trying to measure and why that information is important information Ratios are used both internally and externally 10 10 Categories of Financial Ratios Short-term solvency or liquidity ratios Long-term solvency or financial leverage Long-term ratios ratios Asset management or turnover ratios Profitability ratios Market value ratios 11 11 Computing Liquidity Ratios Current Ratio = CA / CL Quick Ratio = (CA – Inventory) / CL 696 / 1,995 = .35 times NWC to Total Assets = NWC / TA (2,256 – 301) / 1,995 = .98 times Cash Ratio = Cash / CL 2,256 / 1,995 = 1.13 times (2,2...
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