罗斯公司理财Chap002

1、编辑pptFinancial Statements and Cash FlowChapter 2Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin2-1编辑pptUnderstand the information provided by financial statementsDifferentiate between book and market valuesKnow the difference between average and marginal tax r

2、atesGrasp the difference between accounting income and cash flowCalculate a firms cash flow2-2编辑ppt2.1 The Balance Sheet2.2 The Income Statement2.3 Taxes2.4 Net Working Capital2.5 Financial Cash Flow2.6 The Accounting Statement of Cash Flows2-3编辑pptqAn accountants snapshot of the firms accounting va

3、lue at a specific point in timeqThe Balance Sheet Identity is:Assets Liabilities + Stockholders Equity2-4编辑pptAssets exactly equal liabilities + equityAssets are listed in order of liquidity The amount of time it would take to convert them to cash in an operating businessObviously cash and A/R are m

4、ore liquid than property plant and equipment.Liabilities are listed in the order in which they come due2-5编辑ppt2008200720082007Current assets:Current Liabilities: Cash and equivalents$140$107 Accounts payable$213$197 Accounts receivable294270 Notes payable5053 Inventories269280 Accrued expenses22320

5、5 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(550)(460) Total long-term liabilities$588$562 Net property, plant, and eq

6、uipment873814 Intangible assets and other245221Stockholders equity: Total fixed assets$1,118$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

7、 and stockholders equity $1,879$1,7422-6编辑pptWhen analyzing a balance sheet, the Finance Manager should be aware of three concerns:Accounting liquidityDebt versus equityValue versus cost2-7编辑pptRefers to the ease and quickness with which assets can be converted to cashwithout a significant loss in v

8、alueCurrent 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.2-8编辑pptCreditors generally receive the firs

9、t claim on the firms cash flow.Shareholders equity is the residual difference between assets and liabilities.Debt and equity have different costs; the relationship between them has impact on the firms profitability2-9编辑pptUnder Generally Accepted Accounting Principles (GAAP), financial statements of

10、 firms in the U.S. carry assets at historical cost.Market value is the price at which the assets, liabilities, and equity could actually be bought or sold, which is a completely different concept from historical cost.2-10编辑pptMeasures financial performance over a specific period of timeThe accountin

11、g definition of income is:Revenue Expenses Income2-11编辑pptTotal operating revenuesCost of goods soldSelling, general, and administrative expensesDepreciationOperating incomeOther incomeEarnings before interest and taxesInterest expensePretax incomeTaxes Current: $71 Deferred: $13Net income Addition

12、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$862-12编辑pptTotal operating revenues$2,262Cost of goods sold 1,655Selling, general, and administrative expen

13、ses 327Depreciation 90Operating income$190Other income29Earnings before interest and taxes$219Interest expense 49Pretax income$170Taxes 84 Current: $71 Deferred: $13Net income$86 Addition to retained earnings: $43 Dividends: $43The non-operating section of the income statement includes all financing

14、 costs, such as interest expense.2-13编辑pptTotal 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 Di

15、vidends: $43Net income is the “bottom line.”$2,262 1,655 327 90$19029$219 49$170 84$862-14编辑pptThere are three things to keep in mind when analyzing an income statement:Generally Accepted Accounting Principles (GAAP)Noncash Items1.Time and Costs2-15编辑pptqThe matching principal of GAAP dictates that

16、revenues be matched with expenses. qThus, income and expenses are reported when earned or incurred, even though no cash flow may have occurred.2-16编辑pptqDepreciation is the most apparent non-cash item. No firm ever writes a check for “depreciation”qOther noncash accounts include uncollected sales on

17、 account, unpaid purchases on account and deferred taxes, none of which represent a cash flowqThus, net income does not equal cash Thus, net income does not equal cash flowflow2-17编辑pptThink of the future as having two parts: short run and long runIn the short run some costs are fixed and others var

18、iable: In the short run equipment and commitments are fixed. Production can only be varied by altering labor and materialsIn the long run all costs are variable2-18编辑pptqFinancial accountants do not distinguish between variable costs and fixed costsqAccounting costs are usually treated as period or

19、product costsProduct Costs: Total production costsi.e., raw materials, direct labor, manufacturing overheadPeriod Costs: Costs allocated to a time periodi.e., selling, general and administrative costsSuch as accountant salaries, office supplies2-19编辑pptTaxes impact income; important to financial dec

20、isionsTaxes come from various sources:Federal, state, exciseTaxes are always changingMarginal vs. average tax ratesMarginal the percentage paid on the next dollar earnedAverage = the tax bill / taxable incomeFinancial decisions are incremental; applicable tax rate is the marginal rateOther taxes2-20

21、编辑pptSuppose your firm earns $4 million in taxable income. What is the firms tax liability? What is the average tax 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?2-21编辑pptq

22、Net Working Capital Current Assets Current LiabilitiesNWC usually grows with the firm 2-22编辑ppt2008200720082007Current assets:Current Liabilities: Cash and equivalents$140$107 Accounts payable$213$197 Accounts receivable294270 Notes payable5053 Inventories269280 Accrued expenses223205 Other5850 Tota

23、l 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(550)(460 Total long-term liabilities$588$562 Net property, plant, and equipment873814 Int

24、angible assets and other245221Stockholders equity: Total fixed assets$1,118$1,035 Preferred stock$39$39 Common stock ($1 par value)5532Here we see NWC grow to $275 million in 2008 from $252 million in 2007. This increase of $23 million is an investment of the firm.$23 million$275m = $761m- $486m$252

25、m = $707- $4552-23编辑pptIn finance, the most important item that can be extracted from financial statements is the actual cash flow of the firm.Cash flow received from the firms assets must equal the cash flows to the firms creditors and stockholders.CF(A) CF(B) + CF(S) In other words, the cash gener

26、ated by assets enables the firm to pay its debts and provide a return to shareholders. Accounting cash flow and financial cash flow are not necessarily equal.2-24编辑pptCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending -173

27、(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 repurchase of equity minus new equity financing) Total$42Operating

28、Cash Flow:EBIT$219Depreciation $90Current Taxes -$71OCF$2382-25编辑pptCash 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 Flo

29、w of Investors in the FirmDebt (Interest plus retirement of debt minus long-term debt financing)Equity (Dividends plus repurchase of equity minus new equity financing) TotalCapital SpendingPurchase of fixed assets $198Sales of fixed assets -$25Capital Spending $173-173-23$42$366$422-26编辑pptCash Flow

30、 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 minus long-t

31、erm debt financing)Equity (Dividends plus repurchase of equity minus new equity financing) TotalNWC grew from $275 million in 2006 from $252 million in 2005.This increase of $23 million is the addition to NWC.-173-23$42$366$422-27编辑pptCash Flow of the FirmOperating cash flow$238 (Earnings before int

32、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

33、equity minus new equity financing) TotalCash Flow to CreditorsInterest$49Retirement of debt 73Debt service122Proceeds from new debt sales -86Total $36-173-23$42$366$422-28编辑pptCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spend

34、ing (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 equity minus new equity financing) TotalCash Flow to Stockh

35、oldersDividends $43Repurchase of stock 6Cash to Stockholders 49Proceeds from new stock issue -43Total $6-173-23$42$366$422-29编辑pptCash Flow of the FirmOperating cash flow$238 (Earnings before interest and taxes plus depreciation minus taxes)Capital spending (Acquisitions of fixed assets minus sales

36、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 equity minus new equity financing) Total)()()(SCFBCFACFThe cash flow received from the firms assets must

37、equal the cash flows to the firms creditors and stockholders:-173-23$42$366$422-30编辑pptThere 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 2008.The three components of the statement

38、of cash flows are: Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities2-31编辑pptTo calculate cash flow from operations, start with net income, add back noncash items like depreciation and adjust for changes in current assets and liabilities (oth

39、er than cash).OperationsNet IncomeDepreciationDeferred TaxesChanges in Current Assets and LiabilitiesAccounts ReceivableInventoriesAccounts PayableAccrued Expenses$869013-24111618OtherTotal Cash Flow from Operations$202-82-32编辑pptCash flow from investing activities involves changes in capital assets: acquisition of fixed assets and sales of fixed assets (i.e., net capital expenditures).Acquisition of fixed assetsSales of fixed assetsTotal Cash Fl