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1、2-0Financial Statements and Cash FlowChapter 2邑狗锡碘汇哩洽树享粒很温罕屋孽仙釜品窑叠傈贝雍汲撅颇嗡憾羊重赶菲公司金融stephenChap02Accounting Statements and Cash Flow2-1Key Concepts and SkillsUnderstand the information provided by financial statementsDifferentiate between book and market valuesKnow the difference between average and m
2、arginal tax ratesKnow the difference between accounting income and cash flowCalculate a firms cash flow寓蚁氯查耸燃仍慢抑会角淑芽俐灿削熊惑理往坞丝妖然魁誊废残浆十哀摊公司金融stephenChap02Accounting Statements and Cash Flow2-2Chapter Outline2.1 The Balance Sheet2.2 The Income Statement2.3 Taxes2.4 Net Working Capital2.5 Financial Cash
3、 Flow2.6 The Accounting Statement of Cash Flows2.7 Cash Flow Management殊命贺铅崖栽土择汰迁挟叹脐偶敦浙秤十棉办擂橡茄稀胳馏萝窖妆课布愿公司金融stephenChap02Accounting Statements and Cash Flow2-3Sources of InformationAnnual reportsWall Street JournalInternetNYSE ()NASDAQ ()Textbook ()SECEDGAR10K & 10Q reports链鲁碎茎措拾倔挺耙沉顶顾腐毒阂瞳卧烂藏际聊梧职丢晾迷刚
4、撑住紫去县公司金融stephenChap02Accounting Statements and Cash Flow2-42.1 The Balance SheetqAn accountants snapshot of the firms accounting value at a specific point in timeqThe Balance Sheet Identity is:Assets Liabilities + Stockholders Equity仓漓旅叭篙躁徽氓抓吟背硬拢骏入信潜膳吐扫涧街式慈镍耪敷篷识缴柞星公司金融stephenChap02Accounting Statem
5、ents and Cash Flow2-5U.S. Composite Corporation Balance Sheet2010200920102009Current assets:Current Liabilities: Cash and equivalents$140$107 Accounts payable$213$197 Accounts receivable294270 Notes payable5053 Inventories269280 Accrued expenses223205 Other5850 Total current liabilities$486$455 Tota
6、l current assets$761$707Long-term liabilities:Fixed assets: Deferred taxes$117$104 Property, plant, and equipment$1,423$1,274 Long-term debt471458 Less accumulated depreciation(550)(460) Total long-term liabilities$588$562 Net property, plant, and equipment873814 Intangible assets and other245221Sto
7、ckholders equity: Total fixed assets$1,118$1,035 Preferred stock$39$39 Common stock ($1 par value)5532 Capital surplus347327 Accumulated retained earnings390347 Less treasury stock(26)(20) Total equity$805$725Total assets$1,879$1,742Total liabilities and stockholders equity $1,879$1,742The assets ar
8、e listed in order by the length of time it would normally take a firm with ongoing operations to convert them into cash.Clearly, cash is much more liquid than property, plant, and equipment.醒藩斋驾狸驱丫暖拯胚汗镐设桃按衬葫萎础闷婶肚徽奥瞬蘑喇嫡纪掳筷沙公司金融stephenChap02Accounting Statements and Cash Flow2-6Balance Sheet AnalysisW
9、hen analyzing a balance sheet, the Finance Manager should be aware of three concerns:1.Liquidity2.Debt versus equity3.Value versus cost舜亡婆兵卯泵措哩温杨泰知铣演趴嘴胡泰血辖蹲殴搓裂蹦坤猪觅观疵婆刊公司金融stephenChap02Accounting Statements and Cash Flow2-7Liquidity Refers to the ease and quickness with which assets can be converted
10、to cashwithout a significant loss in valueCurrent assets are the most liquid.Some fixed assets are intangible.The more liquid a firms assets, the less likely the firm is to experience problems meeting short-term obligations.Liquid assets frequently have lower rates of return than fixed assets.挡疮忱恨埔尸
11、沏注慰前喳铀卢掖浊伍纺戴始零磋律的币色榷隙共晦铁氓虱公司金融stephenChap02Accounting Statements and Cash Flow2-8Debt versus EquityCreditors generally receive the first claim on the firms cash flow.Shareholders equity is the residual difference between assets and liabilities.熙毡迁教郁悲猛绩晨球幸作跌娶俏辅忱矢硫赵委锦珐祟桔影蚂几喳边驴仪公司金融stephenChap02Account
12、ing Statements and Cash Flow2-9Value versus CostUnder Generally Accepted Accounting Principles (GAAP), audited financial statements of firms in the U.S. carry assets at cost.Market value is the price at which the assets, liabilities, and equity could actually be bought or sold, which is a completely
13、 different concept from historical cost.墅舶笑纱郡催法膝闺墅去然扒较泻呈圾沟坝凹总仙溯诧丁吝述雄娟登彤楷公司金融stephenChap02Accounting Statements and Cash Flow2-102.2 The Income StatementMeasures financial performance over a specific period of timeThe accounting definition of income is:Revenue Expenses Income者抗艺扳夏柱槐敲鞠柬讶夏第曳口岂恨盲红鬃租踊振讲烽
14、卜兄灰英捣岁急公司金融stephenChap02Accounting Statements and Cash Flow2-11U.S.C.C. Income Statement Total operating revenuesCost of goods soldSelling, general, and administrative expensesDepreciationOperating incomeOther incomeEarnings before interest and taxesInterest expensePretax incomeTaxes Current: $71 De
15、ferred: $13Net income Addition to retained earnings $43 Dividends: $43The operations section of the income statement reports the firms revenues and expenses from principal operations.$2,262 1,655 327 90$190 29$219 49$170 84$86蝎售苏丛你血判梁亨壁瓶扁钧斗舒源楞骂峰密市瞳筒茁邱症外刃雏哄莉娱公司金融stephenChap02Accounting Statements and
16、 Cash Flow2-12Total operating revenues$2,262Cost of goods sold 1,655Selling, general, and administrative expenses 327Depreciation 90Operating income$190Other income29Earnings before interest and taxes$219Interest expense 49Pretax income$170Taxes 84 Current: $71 Deferred: $13Net income$86 Addition to
17、 retained earnings: $43 Dividends: $43The non-operating section of the income statement includes all financing costs, such as interest expense.U.S.C.C. Income Statement宪暑壁吃非榨趋直珠暑昔洛锄投麻轨生吉陌近紊丫沃园皑诬甫遵耳桐荫睬公司金融stephenChap02Accounting Statements and Cash Flow2-13Total operating revenuesCost of goods soldSe
18、lling, general, and administrative expensesDepreciationOperating incomeOther incomeEarnings before interest and taxesInterest expensePretax incomeTaxes Current: $71 Deferred: $13Net income Addition to retained earnings: $43 Dividends: $43Usually a separate section reports the amount of taxes levied
19、on income.$2,262 1,655 327 90$19029$219 49$170 84$86U.S.C.C. Income Statement樊淋邱熟玲绷帛忠弊钙柏戎智罩粮戴旧蒂岛飘砾费稗摇壮焙舌控篷瞬冤静公司金融stephenChap02Accounting Statements and Cash Flow2-14Total operating revenuesCost of goods soldSelling, general, and administrative expensesDepreciationOperating incomeOther incomeEarnings
20、 before interest and taxesInterest expensePretax incomeTaxes Current: $71 Deferred: $13Net income Retained earnings: $43 Dividends: $43Net income is the “bottom line.”$2,262 1,655 327 90$19029$219 49$170 84$86U.S.C.C. Income Statement片棕懊块哀拽咯平迄嵌葛秽庇不桥箍啤蒸实鬃泻褐司匪荒赛漠租丫俏吉奋公司金融stephenChap02Accounting Statem
21、ents and Cash Flow2-15Income Statement AnalysisThere are three things to keep in mind when analyzing an income statement:1.Generally Accepted Accounting Principles (GAAP)2.Non-Cash Items3.Time and Costs艳呐掂闪铸励卿奏节状喂腥按泵尚煎驰亭徐价突耙挺惮津碘袋抑穴均珊趟公司金融stephenChap02Accounting Statements and Cash Flow2-16GAAPqThe m
22、atching principle of GAAP dictates that revenues be matched with expenses. qThus, income is reported when it is earned, even though no cash flow may have occurred.酸邀佐杂悸挛辜他馋辫沮全伟告谅姿普薛覆蹬重跨哪加科愉郭厂插割桶躇公司金融stephenChap02Accounting Statements and Cash Flow2-17Non-Cash ItemsqDepreciation is the most apparent.
23、 No firm ever writes a check for “depreciation.”qAnother non-cash item is deferred taxes, which does not represent a cash flow.qThus, net income is not cash.君葬论悟无祥格饶艳渐禄观瞄姿捉伸乃垦螺抽散兆毒掖搭专啸漏图膏苫铀公司金融stephenChap02Accounting Statements and Cash Flow2-18Time and CostsqIn the short-run, certain equipment, res
24、ources, and commitments of the firm are fixed, but the firm can vary such inputs as labor and raw materials.qIn the long-run, all inputs of production (and hence costs) are variable.qFinancial accountants do not distinguish between variable costs and fixed costs. Instead, accounting costs usually fi
25、t into a classification that distinguishes product costs from period costs.褒鸿漏猿谱浪竭掳躁景秸咨准习燎盗迪瓢暴停噪亩散围肖务珍凳钻习兼委公司金融stephenChap02Accounting Statements and Cash Flow2-192.3 TaxesThe one thing we can rely on with taxes is that they are always changingMarginal vs. average tax ratesMarginal the percentage pa
26、id on the next dollar earnedAverage the tax bill / taxable incomeOther taxes力拣辰搭笨褂辫悬其狡驶廊经返钾桶甭县迢忠赠汹仑慷办茸棵陌婶名歹乃公司金融stephenChap02Accounting Statements and Cash Flow2-20Marginal versus Average Rates Suppose your firm earns $4 million in taxable income.What is the firms tax liability?What is the average t
27、ax rate?What is the marginal tax rate?If you are considering a project that will increase the firms taxable income by $1 million, what tax rate should you use in your analysis?迁免状狠晤落蚂珠旺秆桩梧役枕痢溃撩捌炽闺披炎与孙珍拱她率碱蚜凰哥公司金融stephenChap02Accounting Statements and Cash Flow2-212.4 Net Working CapitalqNet Working
28、Capital Current Assets Current LiabilitiesNWC usually grows with the firm 浪哗险剩倘注汲惜斋愉畏剿灾澈阴抹唯妒内蹦贝潞疤但遍腊葡植达返缕俄公司金融stephenChap02Accounting Statements and Cash Flow2-22U.S.C.C. Balance Sheet2010200920102009Current assets:Current Liabilities: Cash and equivalents$140$107 Accounts payable$213$197 Accounts r
29、eceivable294270 Notes payable5053 Inventories269280 Accrued expenses223205 Other5850 Total current liabilities$486$455 Total current assets$761$707Long-term liabilities:Fixed assets: Deferred taxes$117$104 Property, plant, and equipment$1,423$1,274 Long-term debt471458 Less accumulated depreciation(
30、550)(460 Total long-term liabilities$588$562 Net property, plant, and equipment873814 Intangible assets and other245221Stockholders equity: Total fixed assets$1,118$1,035 Preferred stock$39$39 Common stock ($1 par value)5532 Capital surplus347327 Accumulated retained earnings390347 Less treasury sto
31、ck(26)(20) Total equity$805$725Total assets$1,879$1,742Total liabilities and stockholders equity $1,879$1,742Here we see NWC grow to $275 million in 2010 from $252 million in 2009. This increase of $23 million is an investment of the firm.$23 million$275m = $761m- $486m$252m = $707- $455增悍崩凭残收夕潦咙俯寐暮
32、袋监李暂草惊隔炽釜厂星困跨蜗阀皆例揣棒臃公司金融stephenChap02Accounting Statements and Cash Flow2-232.5 Financial Cash FlowIn finance, the most important item that can be extracted from financial statements is the actual cash flow of the firm.Since there is no magic in finance, it must be the case that the cash flow receiv
33、ed from the firms assets must equal the cash flows to the firms creditors and stockholders.CF(A) CF(B) + CF(S) 龋沫肆乖匝用菏菱聘秽睬慢碱说微丝格码雍骏牡沁符畸湃瞄榷烦埔旭桑萧公司金融stephenChap02Accounting Statements and Cash Flow2-24U.S.C.C. Financial Cash FlowCash Flow of the FirmOperating cash flow$238 (Earnings before interest an
34、d taxes plus depreciation minus taxes)Capital spending -173 (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital-23 Total$42Cash Flow of Investors in the FirmDebt$36 (Interest plus retirement of debt minus long-term debt financing)Equity6 (Dividends plus repurch
35、ase of equity minus new equity financing) Total$42Operating Cash Flow:EBIT$219Depreciation $90Current Taxes -$71OCF$238性镀综屑叶讹徐下沛肆镊听斯该掠牢零演萧最瘸耘擦胯吞荐缴况巡啼辽牙公司金融stephenChap02Accounting Statements and Cash Flow2-25U.S.C.C. Financial Cash FlowCash Flow of the FirmOperating cash flow$238 (Earnings before int
36、erest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of Investors in the FirmDebt (Interest plus retirement of debt minus long-term debt financing)Equity (Dividends plus repurchase of
37、equity minus new equity financing) TotalCapital SpendingPurchase of fixed assets $198Sales of fixed assets -$25Capital Spending $173-173-23$42$366$42嗅揩之妻戊途翱岳犹绳感怠进汹逗敛局颇展胸赃队苔有号腰像淳排希靳梦公司金融stephenChap02Accounting Statements and Cash Flow2-26U.S.C.C. Financial Cash FlowCash Flow of the FirmOperating cash
38、 flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of Investors in the FirmDebt (Interest plus retirement of debt minus long-term debt financing)Equity
39、(Dividends plus repurchase of equity minus new equity financing) TotalNWC grew from $275 million in 2010 from $252 million in 2009.This increase of $23 million is the addition to NWC.-173-23$42$366$42居质斡扣圣痴沮缓苯疥撂啃赂颜藐果粪栋乘湾按肩卧著逞驻氢滨短孜祟刁公司金融stephenChap02Accounting Statements and Cash Flow2-27U.S.C.C. Fin
40、ancial Cash FlowCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of Investors in the FirmDebt (Interest plus retire
41、ment of debt minus long-term debt financing)Equity (Dividends plus repurchase of equity minus new equity financing) Total-173-23$42$366$42汐苦连顿期戏弟枉祸蔓械疚晒败路北采洲痘命侥谬造窝挺戈颈匙王北从悼公司金融stephenChap02Accounting Statements and Cash Flow2-28U.S.C.C. Financial Cash FlowCash Flow of the FirmOperating cash flow$238 (
42、Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of Investors in the FirmDebt (Interest plus retirement of debt minus long-term debt financing)Equity (Dividends
43、plus repurchase of equity minus new equity financing) TotalCash Flow to CreditorsInterest$49Retirement of debt 73Debt service122Proceeds from new debt sales -86Total $36-173-23$42$366$42琴朵失汀牢热团骑南郧案恤灸曰咕异函揽丧艳嫉倔妻崖匠授摄豢虾炯短为公司金融stephenChap02Accounting Statements and Cash Flow2-29U.S.C.C. Financial Cash Fl
44、owCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of Investors in the FirmDebt (Interest plus retirement of debt m
45、inus long-term debt financing)Equity (Dividends plus repurchase of equity minus new equity financing) TotalCash Flow to StockholdersDividends $43Repurchase of stock 6Cash to Stockholders 49Proceeds from new stock issue -43Total $6-173-23$42$366$42深蹲椎柑矢踌峪解旁榨筛队舀怕嗽民赂哄煤开壮峙认硫者乌你履售条恬溪公司金融stephenChap02Acco
46、unting Statements and Cash Flow2-30U.S.C.C. Financial Cash FlowCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales of fixed assets)Additions to net working capital TotalCash Flow of
47、Investors in the FirmDebt (Interest plus retirement of debt minus long-term debt financing)Equity (Dividends plus repurchase of equity minus new equity financing) TotalThe cash flow received from the firms assets must equal the cash flows to the firms creditors and stockholders:-173-23$42$366$42胃杰授腹
48、娥彩魂彰蛇愧萧界向豺仆凯礼擅惦肪孪拎散丑寺氦凌简载鸯爬题公司金融stephenChap02Accounting Statements and Cash Flow2-312.5 The Statement of Cash FlowsThere is an official accounting statement called the statement of cash flows.This helps explain the change in accounting cash, which for U.S. Composite is $33 million in 2010.The three
49、components of the statement of cash flows are:Cash flow from operating activitiesCash flow from investing activitiesCash flow from financing activities流吧墩葛陋苹赁搓纬冻嘎诉盆略峙维湘逛总坍登评筏拦忙甭堆猫孤悠催莹公司金融stephenChap02Accounting Statements and Cash Flow2-32U.S.C.C. Cash Flow from OperationsTo calculate cash flow from
50、 operations, start with net income, add back non-cash items like depreciation and adjust for changes in current assets and liabilities (other than cash).OperationsNet IncomeDepreciationDeferred TaxesChanges in Assets and LiabilitiesAccounts ReceivableInventoriesAccounts PayableAccrued ExpensesOtherT
51、otal Cash Flow from Operations$869013-24111618$202-8绞娩滥溪拢岔厦滦匠蝉救趾寒密峡蓖奈拌陪勋壶赢锣或优馋叁迢枚潞盈籍公司金融stephenChap02Accounting Statements and Cash Flow2-33U.S.C.C. Cash Flow from InvestingCash flow from investing activities involves changes in capital assets: acquisition of fixed assets and sales of fixed assets (
52、i.e., net capital expenditures).Acquisition of fixed assetsSales of fixed assetsTotal Cash Flow from Investing Activities-$19825-$173渍豢俱舟菌缮澎凶臆团涵已惟痪怪斧孺厄葵牟辽妻净踞荔栏砾玉剃坪赁筷公司金融stephenChap02Accounting Statements and Cash Flow2-34U.S.C.C. Cash Flow from FinancingCash flows to and from creditors and owners in
53、clude changes in equity and debt.Retirement of debt (includes notes)Proceeds from long-term debt sales-$73 86Total Cash Flow from Financing $4DividendsRepurchase of stock-43Proceeds from new stock issue 43-6 Change in notes payable -3鸵鸯生铬嫡诛堑锻特幽尔诉揖蒂蓝伍碴燥轮碧市答抓恍嫂骑巍辱寻绽汹悯公司金融stephenChap02Accounting Statem
54、ents and Cash Flow2-35U.S.C.C. Statement of Cash FlowsThe statement of cash flows is the addition of cash flows from operations, investing, and financing.OperationsNet IncomeDepreciationDeferred TaxesChanges in Assets and LiabilitiesAccounts ReceivableInventoriesAccounts PayableAccrued Expenses$8690
55、13-24111618OtherTotal Cash Flow from Operations$202-8Acquisition of fixed assetsSales of fixed assetsTotal Cash Flow from Investing Activities-$19825-$173Investing ActivitiesFinancing ActivitiesRetirement of debt (includes notes)Proceeds from long-term debt sales-$7386DividendsRepurchase of stockPro
56、ceeds from new stock issueTotal Cash Flow from Financing -4343$4-6Change in Cash (on the balance sheet)$33Notes Payable -3胁想痪隘粕剔疡隧避志束哎动凹茹师暗膘何妇财豢贱渣铆槐杀贵跺僧煎硼公司金融stephenChap02Accounting Statements and Cash Flow2-362.7 Cash Flow ManagementEarnings can be manipulated using subjective decisions required un
57、der GAAPTotal cash flow is more objective, but the underlying components may also be “managed”Moving cash flow from the investing section to the operating section may make the firms business appear more stable 陷邵畜旁吝购舍蔚工形劳鲤装稍姚傲沂呸技顿晴锡怔雇智院豫辆闺绍哈嗣公司金融stephenChap02Accounting Statements and Cash Flow2-37Qu
58、ick QuizWhat is the difference between book value and market value? Which should we use for decision making purposes?What is the difference between accounting income and cash flow? Which do we need to use when making decisions?What is the difference between average and marginal tax rates? Which should we use when making financial decisions?How do we determine a firms cash flows? What are the equations, and where do we find the information?术来丢赠掖舆躺预瞻剖跺令岸姥室矩才迹泞俭狞冷堕庆淤栓粮给仑拂伺焕公司金融stephenChap02Accounting Statements and Cash Flow
