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1、Chapter Outline2.1 The Balance Sheet2.2 The Income Statement2.3 Net Working Capital2.4 Financial Cash Flow2.5 Summary and ConclusionsSources of Information2.1 The Balance SheetAn accountants snapshot of the firms accounting value as of a particular date.The Balance Sheet Identity is:Equity srStockho
2、ldesLiabilitieAssets When analyzing a balance sheet,the financial manager should be aware of three concerns:accounting liquidity,debt versus equity,and value versus cost.The Balance Sheet of the U.S.Composite Corporation(in$millions)20X2 and 20X1Balance SheetU.S.COMPOSITE CORPORATIONLiabilities(Debt
3、)Assets20X220X1and Stockholders Equity20X220X1Current 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 Total current assets$761$707Long-ter
4、m 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 other245221Stockholders equity:Total fixed assets$1,1
5、18$1,035 Preferred stock$39$39 Common stock($1 per 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$1,742The assets are listed in order by the length of time it n
6、ormally would take a firm with ongoing operations to convert them into cash.Clearly,cash is much more liquid than property,plant and equipment.Balance Sheet AnalysisWhen analyzing a balance sheet,the financial manager should be aware of three concerns:1.Accounting liquidity2.Debt versus equity3.Valu
7、e versus costAccounting Liquidity Refers to the ease and quickness with which assets can be converted to cash.Current assets are the most liquid.Some fixed assets are intangible.The more liquid a firms assets,the less likely the firm is to experience problems meeting short-term obligations.Liquid as
8、sets frequently have lower rates of return than fixed assets.Debt versus Equity Generally,when a firm borrows it gives the bondholders first claim on the firms cash flow.Thus shareholders equity is the residual difference between assets and liabilities.Value versus Cost Under GAAP audited financial
9、statements of firms in the U.S.carry assets at cost.Market value is a completely different concept.2.2 The Income Statement The income statement measures performance over a specific period of time.The accounting definition of income isIncomeExpensesRevenueU.S.C.C.Income Statement(in$millions)20X2Inc
10、ome StatementU.S.COMPOSITE CORPORATIONTotal operating revenuesCost of goods soldSelling,general,and administrative expensesDepreciationOperating incomeOther incomeEarnings before interest and taxesInterest expensePretax incomeTaxes Current:$71 Deferred:$13Net income Retained earnings:$43 Dividends:$
11、43The operations section of the income statement reports the firms revenues and expenses from principal operations$2,262-1,655-327-90$19029$219-49$170-84$86(in$millions)20X2Income StatementU.S.COMPOSITE CORPORATIONTotal operating revenues$2,262Cost of goods sold-1,655Selling,general,and administrati
12、ve expenses-327Depreciation-90Operating income$190Other income29Earnings before interest and taxes$219Interest expense-49Pretax income$170Taxes-84 Current:$71 Deferred:$13Net income$86 Retained earnings:$43 Dividends:$43The non-operating section of the income statement includes all financing costs,s
13、uch as interest expense.U.S.C.C.Income Statement(in$millions)20X2Income StatementU.S.COMPOSITE CORPORATIONTotal operating revenuesCost of goods soldSelling,general,and administrative expensesDepreciationOperating incomeOther incomeEarnings before interest and taxesInterest expensePretax incomeTaxes
14、Current:$71 Deferred:$13Net income Retained earnings:$43 Dividends:$43Usually a separate section reports as a separate item the amount of taxes levied on income.$2,262-1,655-327-90$19029$219-49$170-84$86U.S.C.C.Income Statement(in$millions)20 x2Income StatementU.S.COMPOSITE CORPORATIONTotal operatin
15、g revenuesCost of goods soldSelling,general,and administrative expensesDepreciationOperating incomeOther incomeEarnings 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
16、$19029$219-49$170-84$86U.S.C.C.Income StatementIncome Statement AnalysisThere are three things to keep in mind when analyzing an income statement:1.GAAP2.Non Cash Items3.Time and CostsGenerally Accepted Accounting Principles1.GAAPThe matching principal of GAAP dictates that revenues be matched with
17、expenses.Thus,income is reported when it is earned,even though no cash flow may have occurredIncome Statement Analysis2.Non Cash ItemsDepreciation is the most apparent.No firm ever writes a check for“depreciation”.Another noncash item is deferred taxes,which does not represent a cash flow.Income Sta
18、tement Analysis3.Time and CostsIn the short run,certain equipment,resources,and commitments of the firm are fixed,but the firm can vary such inputs as labor and raw materials.In the long run,all inputs of production(and hence costs)are variable.Financial accountants do not distinguish between variab
19、le costs and fixed costs.Instead,accounting costs usually fit into a classification that distinguishes product costs from period costs.2.3 Net Working CapitalNWC is usually growing with the firm.sLiabilitieCurrent -AssetsCurrent Capital gNet WorkinThe Balance Sheet of the U.S.C.C.(in$millions)20X2 a
20、nd 20X1Balance SheetU.S.COMPOSITE CORPORATIONLiabilities(Debt)Assets20X220X1and Stockholders Equity20X220X1Current assets:Current Liabilities:Cash and equivalents$140$107 Accounts payable$213$197 Accounts receivable294270 Notes payable5053 Inventories269280 Accrued expenses223205 Other5850 Total cur
21、rent 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-550-460 Total long-term liabilities$588$562 Net property,plant,and equipment873814 Intangible ass
22、ets 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 stock-26-20 Total equity$805$725Total assets$1,879$1,742Total liabilities and stockholders equity$1,879$1
23、,742Here we see NWC grow to$275 million in 20X2 from$252 million in 20X1.This increase of$23 million is an investment of the firm.$23 million$275m=$761m-$486m$252m=$707-$4552.4 Financial Cash Flow In finance,the most important item that can be extracted from financial statements is the actual cash f
24、low of the firm.Since there is no magic in finance,it must be the case that the cash from received from the firms assets must equal the cash flows to the firms creditors and stockholders.)()()(SCFBCFACFFinancial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONCa
25、sh Flow of the FirmOperating cash flow$238 (Earnings before interest and 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
26、of debt minus long-term debt financing)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42Operating Cash Flow:EBIT$219Depreciation$90Current Taxes($71)OCF$238Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONCash Flow of the
27、FirmOperating cash flow$238 (Earnings before interest and 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 l
28、ong-term debt financing)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42Capital SpendingPurchase of fixed assets$198Sales of fixed assets (25)Capital Spending$173Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONCash Flow
29、of the FirmOperating cash flow$238 (Earnings before interest and 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
30、minus long-term debt financing)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42NWC grew from$275 million in 20X2 from$252 million in 20X1.This increase of$23 million is the addition to NWC.Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMP
31、OSITE CORPORATIONCash Flow of the FirmOperating cash flow$238 (Earnings before interest and 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 (Intere
32、st plus retirement of debt minus long-term debt financing)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONCash Flow of the FirmOperating cash flow$238 (Earnings before inte
33、rest and 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 r
34、epurchase of equity minus new equity financing)Total$42Cash Flow to CreditorsInterest$49Retirement of debt 73Debt service122Proceeds from new debt sales (86)Total36Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONCash Flow of the FirmOperating cash flow
35、$238 (Earnings before interest and 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
36、)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42Cash Flow to StockholdersDividends$43Repurchase of stock 6Cash to Stockholders 49Proceeds from new stock issue (43)Total$6Financial Cash Flow of the U.S.C.C.(in$millions)20X2Financial Cash FlowU.S.COMPOSITE CORPORATIONC
37、ash Flow of the FirmOperating cash flow$238 (Earnings before interest and 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
38、 of debt minus long-term debt financing)Equity6 (Dividends plus repurchase of equity minus new equity financing)Total$42)()()(SCFBCFACFThe cash from received from the firms assets must equal the cash flows to the firms creditors and stockholders:2.5 Summary and Conclusions Financial statements provide important information regarding the value of the firm.You should keep in mind:Measures of profitability do not take risk or timing of cash flows into account.Financial ratios are linked to one another.
第二章 會計報表與現(xiàn)金流量
