Knowledge of how companies record cash inflows and

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Knowledge of how companies record cash inflows and outflows helps us better under- the statement of cash flows. Determining how changes in asset and liability accounts t cash provides an analytic tool and offers greater insight into managing a business. For ce, reducing the levels of receivables and inventories increases cash. Similarly, increasing levels of accounts payable and accrued liabilities increases cash. Managing cash balances _ managing other accounts is called working capital management, which is important for all parues. -
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2-19 Module 2 I Overview of Business Activities and Financial Statements L 0 2 Analyze and interpret transactions using the financial statement effects template. MID-MODULE REVIEW 1 Followingare accountbalances ($ millions)for Dell Inc. Usingthesedata,prepareDell's income statementand statementof cashflows for the fiscalyear endedJanuary28,2011. Prepareits bal- ance sheetdatedJanuary28, 2011. Cash and cash equivalents, ending year . Net cash provided by financing activities . Long-term debt . Property, plant and equipment, net . Other noncurrent assets. . . Accrued and other current liabilities . Other noncurrent liabilities. . . . Short-term investments. . . . . Income tax expense. . . . . . . . Net cash provided by operating activities. . . Paid-in capital . Cash and cash equivalents, beginning year. . Revenue. . . Short-term debt . $13,913 474 5,146 1,953 6,921 7,339 6,204 452 715 3,969 11,797 10,635 61,494 851 Inventories . Accounts payable. . . . . . . Other stockholders' equity . Long-term investments . Other current assets . Retained earnings . Accounts receivable . Selling, general and administrative expenses. Research and development expenses . Cost of revenue. . . . . . . . . . Net cash used in investing activities . Interest expense . $ 1,301 11,293 (28,775) 704 3,219 24,744 10,136 7,302 661 50,098 (1,165) 83 The solution is on page 2-49. ARTICULATION OF FINANCIAL STATEMENTS The four financial statements are linked with each other and linked across time. This linkage is called articulation. This section demonstrates the articulation of financial statements using Apple. Retained Earnings Reconciliation The balance sheet and income statement are linked via retained earnings. Recall that retained earnings is updated each period and reflects cumulative income that has not yet been distributed to shareholders. Exhibit 2.9 shows Apple's retained earnings reconciliation for 2010. I EXHI'srr 2:9-' , Apple's Retained Earnings Reconciliation APPLE INC. Retained Earnings Reconciliation ($ millions) For Year Ended September 25,2010 Retained earnings, September 26, 2009 $23,353 Add: Net income 14,013 Less: Dividends ...................................... 0 Other adjustments . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . (197) Retained earnings, September 25, 2010 $37,169 This reconciliation of retained earnings links the balance sheet and income statement. In the absence of transactions with stockholders-such as stock issuances and repurchases, and dividend payments-the change in stockholders' equity equals income or loss for the period.
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