The income statement thus measures the change in

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The income statement, thus, measures the change in company value as measured by GAAP. This is not necessarily company value as measured by the market. Of course, all value-relevant items eventually find their way into the income statement. So, from a long-term perspective, the income statement does measure change in company value. This is why stock prices react to reported income and to analysts' expectations about future income. Financial Statement Linkages Articulation of the four financial statements is shown in Exhibit 2.10. Apple begins fiscal 2010 with assets of $47,501 million, consisting of cash for $5,263 million and noncash assets for $42,238 million. These investments are financed with $15,861 million from nonowners and
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Module 2 I Ovel'liew ot Business A.ctivities and Financia\ Statements 2-20 .6-W million from shareholders. The owner financing consists of contributed capital of $8,210 , retained earnings of $23,353 million, and other stockholders' equity of $77 million. ':::"uubit2.10 shows balance sheets at the beginning and end of Apple's fiscal year on the left ight columns, respectively. The middle column reflects operating activities for 2010. The ent of cash flows explains how operating, investing, and financing activities increase the balance by $5,998 million from $5,263 million at the beginning of the year to $11,261 mil- year-end. The ending balance in cash is reported in the year-end balance sheet on the right. ---- ::XHIBIT 2_10 Articulation of Apple Financial Statements ($ millions) ~ Statement of Cash Flows J I For Year Ended September 25,2010 I 1 Balance Sheet c September 26, 2009 Operating cash flows c Investing cash flows .. $ 5,263 L Financing cash flows . 42,238 Net change in cash . $47,501 Cash balance, Sep.26,2009. Cash balance, Sep. 25, 2010 ... $18,595 (13,854) Assets ~JcaSh ... 5,998 Noncash assets 5,263 Total assets ... Liabilities and equity $11,261 Total liabitities . Equity Contributed capital. Retained earnings. Other stockholders' equity .... (46) $75,183 -- ::..s- __ . assets. assets .... $11,261 63,922 $75,183 and equity Ebilities .... $15,861 $27,392 8,210 23,353 10,668 37,169 Income Statement I ForYear Ended September 25, 2010 Revenues. . $65,225 Expenses ..... 51,212 Net earnings. $14,013 Liabilities and equity .... earnings .. stockholders' =r:Pty ... 77 $47,501 and equity. Statement of Sharehol ers' Equity For Year Ended Septem er 25, 2010 Contributed capital, Sep. 26, 2009 . Stock issuance ..... $ 8,210 2,458 Contributed capital, Sep. 25, 2010 . $10,668 Retained earnings, Sep.26,2009. Net income. Less: dividends Less: other adjustments . Retained earnings, Sep. 25, 2010 .. $37,169 $23,353 14,013 o (197) Other stockholders' equity, Sep. 26, 2009 .. Other changes in equity ... Other stockholders' equity Sep.25,2010 . $ 77 (123) $ (46) - - - I During the year I Apple's $14,013 million net income reported on the income statement is also carried over to ement of shareholders' equity. The net income explains nearly all of the change in retained - g reported in the statement of shareholders' equity because Apple paid no dividends in that other adjustments reduce retained earnings by $197 million).
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