CHAPTER 5 Balance Sheet and Statement of Cash Flows...
-
date post
21-Dec-2015 -
Category
Documents
-
view
224 -
download
4
Transcript of CHAPTER 5 Balance Sheet and Statement of Cash Flows...
![Page 1: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/1.jpg)
CHAPTER 5Balance Sheetand Statement of Cash Flows……..…………………………………………………………...
Usefulness of the Balance Sheet
Assets, liabilities, & equity at a specific date.
helps predict amount &
uncertainty of future cash
flows
2003 2004 2005
![Page 2: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/2.jpg)
useful for analyzing a company’s …
ability to getcash as needed
ability topay debts
ability to respondto the unexpected
![Page 3: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/3.jpg)
Limitations of the Balance Sheet
Historical cost is not
always . …
… but it’s more . than fair value estimates.
Omits items of financial value.
When reliable estimates cannot
be made.
Numbers not completely
reliable.
Judgment is frequently involved.
D LLE
$3 M
$300 M?
![Page 4: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/4.jpg)
Type or expected function
Financial flexibilityand liquidity
characteristics
CLASSIFICATION IN THE BALANCE SHEET
land for production vs. land for investment
petty cash vs. bond sinking fund
![Page 5: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/5.jpg)
Cash
Short-termInvestments
Receivables
Current Assets
restrictions must be noted
restricted cash might be non-current held-to-maturity
trading available-for-sale
trade vs. non-trade pledged
![Page 6: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/6.jpg)
Current Assets (cont.)
Inventories valuation basis
disclosed grouped by stage
of completion
Prepaid ExpensesPAID benefits to be received
within 1 year
![Page 7: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/7.jpg)
Long-Term Investments
Securities$1,000
REGISTERED
8.0%TangibleFixed Assets
Special FundsSubsidiaries(nonconsolidated)
intended to be held for more than a year not currently used
in operations
![Page 8: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/8.jpg)
Property, Plant, and Equipment
Intangible Assets
durable nature
used in operations
disclose accumulated depreciation
lacking physical substance
![Page 9: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/9.jpg)
Current Liabilities
AccountsPayable Current Portion
Long-Term Bonds
reasonably expected to be liquidated
within the normal business cycle
Unearned Revenue
$1,000
REGISTERED
8.0%
$1,000
REGISTERED
8.0%
$1,000
REGISTERED
8.0%Due 2003
![Page 10: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/10.jpg)
Long-Term Liabilities
not expected to be liquidated within a year
Bonds Payable
$1,000
REGISTERED
8.0%
$1,000
REGISTERED
8.0%
PensionObligations
ProductWarranties
![Page 11: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/11.jpg)
Financial Instruments
carrying value and estimated fair value
Owners’ Equity
Capital Stock
par value
authorized, issued, and outstanding
Additional Paid-In Capital
Retained Earnings
unappropriated vs. restricted
Treasury Stock
![Page 12: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/12.jpg)
STATEMENT OF CASH FLOWS
Operating activities
cash receipts from operations
cash expenditures from operations
Investing activities
property, plant, & equipment
debt or equity securities
Financing activities
issuance of stocks or bonds
payment of dividends
![Page 13: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/13.jpg)
Net Income Cash from Operations
Adjust for non-cash expenses
add back
depreciation expense
amortization expense
Adjust for non-cash gains and losses
add back
loss on sale of plant assets
subtract
gain on sale of securities
![Page 14: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/14.jpg)
Adjust for changes in operating assets
accounts receivable
inventory
prepaid expenses
Adjust for changes operating liabilities
accounts payable
unearned revenues
![Page 15: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/15.jpg)
Changes in Assets and Liabilities
Assets Liabilities
Increase
Decrease
![Page 16: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/16.jpg)
Usefulness of the Statement of Cash Flows
“cash is the lifeblood of a company”
the statement provides useful information:
whether the company is generating
sufficient cash through operations
reasons for positive or negative cash flow
Current cash debtcoverage ratio
Net Cash from Operations
Average Current Liabilities=
Cash debtcoverage ratio
Net Cash from Operations
Average Total Liabilities=
![Page 17: CHAPTER 5 Balance Sheet and Statement of Cash Flows ……..…………………………………………………………... Usefulness of the Balance Sheet Assets, liabilities,](https://reader036.fdocuments.in/reader036/viewer/2022062308/56649d585503460f94a37714/html5/thumbnails/17.jpg)
Free Cash Flow
discretionary cash flow from operations
cash flow from selling investment securities,
issuing stock, or taking out a loan doesn’t count!
Net cash from operations
Free cash flow
- Dividends
- Capital expenditures