Transcript Document 7829134

Financial Statement
The Balance Sheet
The Income Statement
The Statement of Cash Flows
Accounting for Differences
Fin 301 - Dr. Menahem Rosenberg
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The Balance Sheet
Definition
Financial statements that show
the value of the firm’s assets and
liabilities at a particular point in
time (from an accounting
perspective).
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
The Balance Sheet
The Main Balance Sheet Items
Current Liabilities
Payables
Accruals
Short-term Debt
Current Assets
Cash & Securities
Receivables
Inventories
+
=
Fixed Assets
Tangible Assets
Intangible Assets
Fin 301 - Dr. Menahem Rosenberg
+
Long-term Liabilities
+
Shareholders’ Equity
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Market Value vs. Book Value
Book Values are determined by GAAP
Market Values are determined by current
values
Equity and Asset “Market Values” are usually
higher than their “Book Values”
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The Income Statement
Definition
Financial statement that shows
the revenues, expenses, and net
income of a firm over a period of
time (from an accounting
perspective).
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The Income Statement
Earnings Before Income & Taxes (EBIT)
EBIT = - total Revenues
- costs
- deprecation
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The Income Statement
Timberland Co. Year End 12/31/2001- in thousands
Revenue
1,183,623
COGS
662,848
SG&A
334,490
EBIT
186,285
Depreciation & Amortization
Interest Expense
Other income
Average O/S
shares 40,247
23,192
1,560
196
EBT
161,729
Tax Expense
54,988
Net Income
106,741
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Profits vs. Cash Flows
Differences
“Profits” subtract depreciation (a non-cash expense)
“Profits” ignore cash expenditures on new capital
(the expense is capitalized)
“Profits” record income and expenses at the time of
sales, not when the cash exchanges actually occur
“Profits” do not consider changes in working capital
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The Statement of Cash Flows
Definition
Financial statement that shows
the firm’s cash receipts and cash
payments over a period of time.
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The Statement of Cash Flows
+ Net Income
+ Non-cash expenses
+ Depreciation
Changes in working capital
- chg A/R +chg A/P -chg Inv
= Cash Flow from Operations
Cash from New Investments - purchases + sales
Cash from Financing - repurchase of stock or debt
+ sales of stock or debt
- dividend
Net Change in Cash Position (from previous B/S to current)
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Accounting for Differences
Subjective aspects exist in reporting
earnings and book value
Some liabilities may excluded from balance
sheets (off balance sheet financing).
International accounting standards vary
Share outstanding in per share computations
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Leverage Ratios
Long Term Debt
Long Term Debt Ratio 
Long Term Debt  Equity
Long Term Debt
Debt Equity Ratio 
Equity
Total Liability
Total Debt Ratio 
Total Assets
EBIT
Time Interest Earned 
Interest Expense
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Liquidity Ratios
Net Workin g Capital  Current Assets - Current Liab.
Current Assets
Current Ratio 
Current Liabilitie s
Current Assets - Inventory
Quick Ratio 
Current Liabilitie s
Cash and Equivalent s
Cash Ratio 
Current Liabilitie s
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Efficiency Ratios
Sales
Assets turnover 
Average Assets
COGS
Inventory turnover 
Average Inventory
365
Inventory Days 
Inventory Turnover
Sales
Receivable Days 
Average Receivable s/365
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Profitability Ratios
EBIT - Tax
Net Profit Margin 
Sales
EBIT - Tax
Return on Assets (ROA) 
Average Total Assets
NI avaiable to common equity
Return on Equity 
Average common equity
Dividend
Payout Ratio 
NI
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Market Value Ratios
NI available to equity
Earning Per Share (EPS) 
Average O/S shares
Stock Price
Price Earning Ration PE 
Earning Per Share
Dividend Per Share
Dividend Yiels 
Stock price
Book Value  Total Assets - Total Liabilitie s
Stock Price
Market to BV per Share 
BV per Share
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