chapter-2-financial-statements
公司理财(英文版)题库2
CHAPTER 2Financial Statements & Cash Flow Multiple Choice Questions:I. DEFINITIONSBALANCE SHEETb 1. The financial statement showing a firm’s accounting value on a particular date is the:a. income statement.b. balance sheet.c. statement of cash flows.d. tax reconciliation statement.e. shareholders’ equity sheet.Difficulty level: EasyCURRENT ASSETSc 2. A current asset is:a. an item currently owned by the firm.b. an item that the firm expects to own within the next year.c. an item currently owned by the firm that will convert to cash within the next 12 months.d. the amount of cash on hand the firm currently shows on its balance sheet.e. the market value of all items currently owned by the firm.Difficulty level: EasyLONG-TERM DEBTb 3. The long-term debts of a firm are liabilities:a. that come due within the next 12 months.b. that do not come due for at least 12 months.c. owed to the firm’s suppliers.d. owed to the firm’s shareholders.e. the firm expects to incur within the next 12 months.Difficulty level: EasyNET WORKING CAPITALe 4. Net working capital is defined as:a. total liabilities minus shareholders’ equity.b. current liabilities minus shareholders’ equity.c. fixed assets minus long-term liabilities.d. total assets minus total liabilities.e. current assets minus current liabilities.Difficulty level: EasyLIQUID ASSETSd 5. A(n) ____ asset is one which can be quickly converted into cash without significantloss in value.a. currentb. fixedc. intangibled. liquide. long-termDifficulty level: EasyINCOME STATEMENTa 6. The financial statement summarizing a firm’s performance over a period of time is the:a. income statement.b. balance sheet.c. statement of cash flows.d. tax reconciliation statement.e. shareholders’ equity sheet.Difficulty level: EasyNONCASH ITEMSd 7. Noncash items refer to:a. the credit sales of a firm.b. the accounts payable of a firm.c. the costs incurred for the purchase of intangible fixed assets.d. expenses charged against revenues that do not directly affect cash flow.e. all accounts on the balance sheet other than cash on hand.Difficulty level: EasyMARGINAL TAX RATESe 8. Your _____ tax rate is the amount of tax payable on the next taxable dollar you earn.a. deductibleb. residualc. totald. averagee. marginalDifficulty level: EasyAVERAGE TAX RATESd 9. Your _____ tax rate measures the total taxes you pay divided by your taxable income.a. deductibleb. residualc. totald. averagee. marginalDifficulty level: EasyCASH FLOW FROM OPERATING ACTIVITIESa 10. _____ refers to the cash flow that results from the firm’s ongoing, normal businessactivities.a. Cash flow from operating activitiesb. Capital spendingc. Net working capitald. Cash flow from assetse. Cash flow to creditorsDifficulty level: MediumCASH FLOW FROM INVESTINGb 11. _____ refers to the changes in net capital assets.a. Operating cash flowb. Cash flow from investingc. Net working capitald. Cash flow from assetse. Cash flow to creditorsDifficulty level: MediumNET WORKING CAPITALc 12. _____ refers to the difference between a firm’s current assets and its current liabilities.a. Operating cash flowb. Capital spendingc. Net working capitald. Cash flow from assetse. Cash flow to creditorsDifficulty level: EasyCASH FLOW OF OPERATIONSd 13. _____ refers to the net total cash flow of the firm available for distribution to itscreditors and stockholders.a. Operating cash flowb. Capital spendingc. Net working capitald. Cash flow from operationse. Cash flow to creditorsCASH FLOW TO CREDITORSe 14. _____ refers to the firm’s interest payments less any net new borrowing.a. Operating cash flowb. Capital spendingc. Net working capitald. Cash flow from shareholderse. Cash flow to creditorsCASH FLOW TO STOCKHOLDERSe 15. _____ refers to the firm’s dividend payments less any net new equity raised.a. Operating cash flowb. Capital spendingc. Net working capitald. Cash flow from creditorse. Cash flow to stockholdersEARNINGS PER SHAREa 16. Earnings per share is equal to:a. net income divided by the total number of shares outstanding.b. net income divided by the par value of the common stock.c. gross income multiplied by the par value of the common stock.d. operating income divided by the par value of the common stock.e. net income divided by total shareholders’ equity.DIVIDENDS PER SHAREb 17. Dividends per share is equal to dividends paid:a. divided by the par value of common stock.b. divided by the total number of shares outstanding.c. divided by total shareholders’ equity.d. multiplied by the par value of the common stock.e. multiplied by the total number of shares outstanding.II. CONCEPTSCURRENT ASSETSa 18. Which of the following are included in current assets?I. equipmentII. inventoryIII. accounts payableIV. casha. II and IV onlyb. I and III onlyc. I, II, and IV onlyd. III and IV onlye. II, III, and IV onlyCURRENT LIABILITIESb 19. Which of the following are included in current liabilities?I. note payable to a supplier in eighteen monthsII. debt payable to a mortgage company in nine monthsIII. accounts payable to suppliersIV. loan payable to the bank in fourteen monthsa. I and III onlyb. II and III onlyc. III and IV onlyd. II, III, and IV onlye. I, II, and III onlyBALANCE SHEETd 20. An increase in total assets:a.means that net working capital is also increasing.b.requires an investment in fixed assets.c.means that shareholders’ equity must also increase.d.must be offset by an equal increase in liabilities and shareholders’ equity.e.can only occur when a firm has positive net income.LIQUIDITYc 21. Which one of the following accounts is generally the most liquid?a. inventoryb.buildingc.accounts receivabled.equipmente.patentLIQUIDITYe 22. Which one of the following statements concerning liquidity is correct?a.If you sold an asset today, it is a liquid asset.b.If you can sell an asset next year at a price equal to its actual value, the asset is highlyliquid.c.Trademarks and patents are highly liquid.d.The less liquidity a firm has, the lower the probability the firm will encounter financialdifficulties.e.Balance sheet accounts are listed in order of decreasing liquidity.LIQUIDITYd 23. Liquidity is:a. a measure of the use of debt in a firm’s capital structure.b.equal to current assets minus current liabilities.c.equal to the market value of a firm’s total assets minus its current liabilities.d.valuable to a firm even though liquid assets tend to be less profitable to own.e.generally associated with intangible assets.SHAREHOLDERS’ EQUITYd 24. Which of the following accounts are included in shareholders’ equity?I. interest paidII. retained earningsIII. capital surplusIV. long-term debta. I and II onlyb. II and IV onlyc. I and IV onlyd. II and III onlye. I and III onlyBOOK VALUEb 25. Book value:a. is equivalent to market value for firms with fixed assets.b.is based on historical cost.c.generally tends to exceed market value when fixed assets are included.d.is more of a financial than an accounting valuation.e.is adjusted to market value whenever the market value exceeds the stated book value. MARKET VALUEa 26. When making financial decisions related to assets, you should:a.always consider market values.b.place more emphasis on book values than on market values.c.rely primarily on the value of assets as shown on the balance sheet.d.place primary emphasis on historical costs.e.only consider market values if they are less than book values.INCOME STATEMENTd 27. As seen on an income statement:a.interest is deducted from income and increases the total taxes incurred.b.the tax rate is applied to the earnings before interest and taxes when the firm has bothdepreciation and interest expenses.c.depreciation is shown as an expense but does not affect the taxes payable.d.depreciation reduces both the pretax income and the net income.e.interest expense is added to earnings before interest and taxes to get pretax income. EARNINGS PER SHAREa 28. The earnings per share will:a. increase as net income increases.b.increase as the number of shares outstanding increase.c.decrease as the total revenue of the firm increases.d.increase as the tax rate increases.e.decrease as the costs decrease.DIVIDENDS PER SHAREe 29. Dividends per share:a. increase as the net income increases as long as the number of shares outstandingremains constant.b.decrease as the number of shares outstanding decrease, all else constant.c.are inversely related to the earnings per share.d.are based upon the dividend requirements established by Generally AcceptedAccounting Procedures.e.are equal to the amount of net income distributed to shareholders divided by thenumber of shares outstanding.REALIZATION PRINCIPLEb 30. According to Generally Accepted Accounting Principles,a.income is recorded based on the matching principle.b.income is recorded based on the realization principle.c.costs are recorded based on the liquidity principle. income is recorded based on the realization principle.e.depreciation is recorded as it affects the cash flows of a firm.MATCHING PRINCIPLEc 31. According to Generally Accepted Accounting Principles, costs are:a. recorded as incurred.b. recorded when paid.c. matched with revenues.d. matched with production levels.e. expensed as management desires.NONCASH ITEMSa 32. Depreciation:a. is a noncash expense that is recorded on the income statement.b.increases the net fixed assets as shown on the balance sheet.c.reduces both the net fixed assets and the costs of a firm.d.is a non-cash expense which increases the net operating income.e.decreases net fixed assets, net income, and operating cash flows.MARGINAL TAX RATEc 33. When you are making a financial decision, the most relevant tax rate is the _____ rate.a. averageb.fixedc.marginald.totale.variableOPERATING CASH FLOWa 34. An increase in which one of the following will cause the operating cash flow toincrease?a. depreciationb.change in net working capital working capitald.taxese.costsCHANGE IN NET WORKING CAPITALe 35. A firm starts its year with a positive net working capital. During the year, the firmacquires more short-term debt than it does short-term assets. This means that:a. the ending net working capital will be negative.b. both accounts receivable and inventory decreased during the year.c. the beginning current assets were less than the beginning current liabilities.d. accounts payable increased and inventory decreased during the year.e. the ending net working capital can be positive, negative, or equal to zero.CASH FLOW TO CREDITORSc 36. The cash flow to creditors includes the cash:a.received by the firm when payments are paid to suppliers.b.outflow of the firm when new debt is acquired.c. outflow when interest is paid on outstanding debt.d. inflow when accounts payable decreases.e. received when long-term debt is paid off.CASH FLOW TO STOCKHOLDERSa 37. Cash flow to stockholders must be positive when:a.the dividends paid exceed the net new equity raised.b.the net sale of common stock exceeds the amount of dividends paid.c.no income is distributed but new shares of stock are sold.d.both the cash flow to assets and the cash flow to creditors are negative.e.both the cash flow to assets and the cash flow to creditors are positive. BALANCE SHEETb 38. Which equality is the basis for the balance sheet?a. Fixed Assets = Stockholder's Equity + Current Assetsb. Assets = Liabilities + Stockholder's Equityc. Assets = Current Long-Term Debt + Retained Earningsd. Fixed Assets = Liabilities + Stockholder's Equitye. None of the above.BALANCE SHEETa 39. Assets are listed on the balance sheet in order of:a. decreasing liquidity.b. decreasing size.c. increasing size.d. relative life.e. None of the above.DEBTe 40. Debt is a contractual obligation that:a. requires the payout of residual flows to the holders of these instruments.b. requires a repayment of a stated amount and interest over the period.c. allows the bondholders to sue the firm if it defaults.d. Both A and B.e. Both B and C.CARRYING VALUEa 41. The carrying value or book value of assets:a. is determined under GAAP and is based on the cost of the asset.b. represents the true market value according to GAAP.c. is always the best measure of the company's value to an investor.d. is always higher than the replacement cost of the assets.e. None of the above.GAAPd 42. Under GAAP, the value of all the firm's assets are reported at:a. market value.b. liquidation value.c. intrinsic value.d. cost.e. None of the above.INCOME STATEMENTe 43. Which of the following statements concerning the income statement is true?a. It measures performance over a specific period of time.b. It determines after-tax income of the firm.c. It includes deferred taxes.d. It treats interest as an expense.e. All of the above.GAAP INCOME RECOGNITIONb 44. According generally accepted accounting principles (GAAP), revenue is recognized asincome when:a. a contract is signed to perform a service or deliver a good.b. the transaction is complete and the goods or services are delivered.c. payment is requested.d. income taxes are paid.e. All of the above.OPERATING CASH FLOWb 45. Which of the following is not included in the computation of operating cash flow?a. Earnings before interest and taxesb. Interest paidc. Depreciationd. Current taxese. All of the above are included.NET CAPITAL SPENDINGb 46. Net capital spending is equal to:a. net additions to net working capital.b. the net change in fixed assets.c. net income plus depreciation.d. total cash flow to stockholders less interest and dividends paid.e. the change in total assets.CASH FLOW TO STOCKHOLDERSd 47. Cash flow to stockholders is defined as:a. interest payments.b. repurchases of equity less cash dividends paid plus new equity sold.c. cash flow from financing less cash flow to creditors.d. cash dividends plus repurchases of equity minus new equity financing.e. None of the above.FREE CASH FLOWd 48. Free cash flow is:a. without cost to the firm.b. net income plus taxes.c. an increase in net working capital.d. cash flow in excess of that required to fund profitable capital projects.e. None of the above.CASH FLOWd 49. The cash flow of the firm must be equal to:a. cash flow to equity minus cash flow to debtholders.b. cash flow to debtholders minus cash flow to equity.c. cash flow to governments plus cash flow to equity.d. cash flow to equity plus cash flow to debtholders.e. None of the above.STATEMENT OF CASH FLOWSa 50. Which of the following are all components of the statement of cash flows?a. Cash flow from operating activities, cash flow from investing activities, and cash flowfrom financing activitiesb. Cash flow from operating activities, cash flow from investing activities, and cashflowfrom divesting activitiesc. Cash flow from internal activities, cash flow from external activities, and cash flowfrom financing activitiesd. Cash flow from brokering activities, cash flow from profitable activities, and cash flowfrom non-profitable activitiese. None of the above.III. PROBLEMSCURRENT ASSETSb 51. A firm has $300 in inventory, $600 in fixed assets, $200 in accounts receivables, $100in accounts payable, and $50 in cash. What is the amount of the current assets?a. $500b. $550c. $600d. $1,150e. $1,200NET WORKING CAPITALb 52. The total assets are $900, the fixed assets are $600, long-term debt is $500, and short-term debt is $200. What is the amount of net working capital?a. $0b. $100c. $200d. $300e. $400LIQUIDITYd 53. Brad’s Company has equipme nt with a book value of $500 that could be sold today at a50 percent discount. Their inventory is valued at $400 and could be sold to acompetitor for that amount. The firm has $50 in cash and customers owe them $300.What is the accounting value of their liquid assets?a. $50b. $350c. $700d. $750e. $1,000BOOK VALUEc 54. Martha’s Enterprises spent $2,400 to purchase equipment three years ago. Thisequipment is currently valued at $1,800 on today’s balance sheet but could actually besold for $2,000. Net working capital is $200 and long-term debt is $800. What is thebook value of shareholders’ equity?a.$200b.$800c.$1,200d.$1,400e. The answer cannot be determined from the information provided.NET INCOMEb 55. Art’s Boutique has sales of $640,000 an d costs of $480,000. Interest expense is$40,000 and depreciation is $60,000. The tax rate is 34%. What is the net income?a. $20,400b. $39,600c. $50,400d. $79,600e. $99,600MARGINAL TAX RATEc 56. Given the tax rates as shown, what is the average tax rate for a firm with taxableincome of $126,500?Taxable Income Tax Rate$ 0 - 50,000 15%50,001 - 75,000 25%75,001 - 100,000 34%100,001 - 335,000 39%a.21.38 percentb.23.88 percentc.25.76 percentd.34.64 percente. 39.00 percentTAXESd 57. The tax rates are as shown. Your firm currently has taxable income of $79,400. Howmuch additional tax will you owe if you increase your taxable income by $21,000?Taxable Income Tax Rate$ 0 - 50,000 15%50,001 - 75,000 25%75,001 - 100,000 34%100,001 - 335,000 39%a.$7,004b.$7,014c.$7,140d.$7,160e.$7,174OPERATING CASH FLOWd 58. Your firm has net income of $198 on total sales of $1,200. Costs are $715 anddepreciation is $145. The tax rate is 34 percent. The firm does not have interestexpenses. What is the operating cash flow?a.$93b.$241c.$340d.$383e. $485NET CAPITAL SPENDINGc. 59. Teddy’s Pillows has beginning net fixed assets of $480 and ending net fixed assets of$530. Assets valued at $300 were sold during the year. Depreciation was $40. What isthe amount of capital spending?a.$10b.$50c.$90d.$260e.$390CHANGE IN NET WORKING CAPITALb 60. At the beginning of the year, a firm has current assets of $380 and current liabilities of$210. At the end of the year, the current assets are $410 and the current liabilities are$250. What is the change in net working capital?a.-$30b.-$10c.$0d.$10e. $30CASH FLOW TO CREDITORSe 61. At the beginning of the year, long-term debt of a firm is $280 and total debt is $340. Atthe end of the year, long-term debt is $260 and total debt is $350. The interest paid is$30. What is the amount of the cash flow to creditors?a.-$50b.-$20c.$20d.$30e. $50CASH FLOW TO CREDITORSa 62. Pete’s Boats has beginning long-term debt of $180 and ending long-term debt of $210.The beginning and ending total debt balances are $340 and $360, respectively. Theinterest paid is $20. What is the amount of the cash flow to creditors?a.-$10b.$0c.$10d.$40e. $50CASH FLOW TO STOCKHOLDERSa 63. Peggy Grey’s Cookies has net income of $360. The firm pays out 40 percent of the netincome to its shareholders as dividends. During the year, the company sold $80 worthof common stock. What is the cash flow to stockholders?a.$64b.$136c.$144d.$224e. $296CASH FLOW TO STOCKHOLDERSa 64. Thompson’s Jet Skis has operating cash flow of $218. Depreciation is $45 and interestpaid is $35. A net total of $69 was paid on long-term debt. The firm spent $180 onfixed assets and increased net working capital by $38. What is the amount of the cashflow to stockholders?a.-$104b.-$28c.$28d.$114e. $142The following balance sheet and income statement should be used for questions #65 through #71:Nabors, Inc.2005 Income Statement($ in millions)Net sales $9,610Less: Cost of goods sold 6,310Less: Depreciation 1,370Earnings before interest and taxes 1,930Less: Interest paid 630Taxable Income $1,300Less: Taxes 455Net income $ 845Nabors, Inc.2004 and 2005 Balance Sheets($ in millions)2004 2005 2004 2005 Cash $ 310 $ 405 Accounts payable $ 2,720 $ 2,570 Accounts rec. 2,640 3,055 Notes payable 100 0 Inventory 3,275 3,850 Total $ 2,820 $ 2,570 Total $ 6,225 $ 7,310 Long-term debt 7,875 8,100 Net fixed assets 10,960 10,670 Common stock 5,000 5,250Retained earnings 1,490 2,060 Total assets $17,185 $17,980 Total liab.& equity $17,185 $17,980 CHANGE IN NET WORKING CAPITALc 65. What is the change in the net working capital from 2004 to 2005?a.$1,235b.$1,035c.$1,335d.$3,405e.$4,740NONCASH EXPENSESd 66. What is the amount of the non-cash expenses for 2005?a.$570b.$630c.$845d.$1,370e. $2,000NET CAPITAL SPENDINGc 67. What is the amount of the net capital spending for 2005?a.-$290b.$795c.$1,080d.$1,660e.$2,165OPERATING CASH FLOWd 68. What is the operating cash flow for 2005?a.$845b.$1,930c.$2,215d.$2,845e.$3,060CASH FLOW OF THE FIRMa 69. What is the cash flow of the firm for 2005?a.$430b.$485c.$1,340d.$2,590e.$3,100NET NEW BORROWINGe 70. What is the amount of net new borrowing for 2005?a.-$225b.-$25c.$0d.$25e.$225CASH FLOW TO CREDITORSd 71. What is the cash flow to creditors for 2005?a.-$405b.-$225c.$225d.$405e.$630The following information should be used for questions #72 through #79:Knickerdoodles, Inc.2004 2005Sales $ 740 $ 785COGS 430 460Interest 33 35Dividends 16 17Depreciation 250 210Cash 70 75Accounts receivables 563 502Current liabilities 390 405Inventory 662 640Long-term debt 340 410Net fixed assets 1,680 1,413Common stock 700 235Tax rate 35% 35%NET WORKING CAPITALd 72. What is the net working capital for 2005?a.$345b.$405c.$805d.$812e.$1,005CHANGE IN NET WORKING CAPITALa 73. What is the change in net working capital from 2004 to 2005?a.-$93b.-$7c.$7d.$85e.$97NET CAPITAL SPENDINGb 74. What is net capital spending for 2005?a.-$250b.-$57c.$0d.$57e.$477OPERATING CASH FLOWb 75. What is the operating cash flow for 2005?a.$143b.$297c.$325d.$353e.$367CASH FLOW OF THE FIRMd 76. What is the cash flow of the firm for 2005?a.$50b.$247c.$297d.$447e.$517NET NEW BORROWINGd 77. What is net new borrowing for 2005?a.-$70b.-$35c.$35d.$70e.$105CASH FLOW TO CREDITORSb 78. What is the cash flow to creditors for 2005?a.-$170b.-$35c.$135d.$170e.$205CASH FLOW TO STOCKHOLDERSd 79. What is the cash flow to stockholders for 2005?a.$408b.$417c.$452d.$482e.$503The following information should be used for questions #80 through #82:2005Cost of goods sold $3,210Interest $215Dividends $160Depreciation $375Change in retained earnings $360Tax rate 35%TAXABLE INCOMEe 80. What is the taxable income for 2005?a.$360b.$520c.$640d.$780e.$800OPERATING CASH FLOWd 81. What is the operating cash flow for 2005?a.$520b.$800c.$1,015d.$1,110e.$1,390SALESc 82. What are the sales for 2005?a.$4,225b.$4,385c.$4,600d.$4,815e. $5,000NET INCOMEb 83. Calculate net income based on the following information. Sales are $250; Cost ofgoods sold is $160; Depreciation expense is $35; Interest paid is $20; and the tax rateis 34%.a. $11.90b. $23.10c. $35.00d. $36.30e. $46.20IV. ESSAYSLIQUID ASSETS84. What is a liquid asset and why is it necessary for a firm to maintain a reasonable level ofliquid assets?Liquid assets are those that can be sold quickly with little or no loss in value. A firm that has sufficient liquidity will be less likely to experience financial distress.OPERATING CASH FLOW85. Why is interest expense excluded from the operating cash flow calculation?Operating cash flow is designed to represent the cash flow a firm generates from its day-to-day operating activities. Interest expense arises out of a financing choice and thus should be considered as a cash flow to creditors.CASH FLOW AND ACCOUNTING STATEMENTS86. Explain why the income statement is not a good representation of cash flow.Most income statements contain some noncash items, so these must be accounted for when calculating cash flows. More importantly, however, since GAAP is used to create income statements, revenues and expenses are booked when they accrue, not when their corresponding cash flows occur.BOOK VALUE AND MARKET VALUE87. Discuss the difference between book values and market values on the balance sheet andexplain which is more important to the financial manager and why.The accounts on the balance sheet are generally carried at historical cost, not market values.Although the book value of current assets and current liabilities may closely approximate market values, the same cannot be said for the rest of the balance sheet accounts. Ultimately, the financ ial manager should focus on the firm’s stock price, which is a market value measure. Hence, market values are more meaningful than book values.ADDITION TO RETAINED EARNINGS88. Note that in all of our cash flow computations to determine cash flow of the firm, we neverinclude the addition to retained earnings. Why not? Is this an oversight?The addition to retained earnings is not a cash flow. It is simply an accounting entry that reconciles the balance sheet. Any additions to retained earnings will show up as cash flow changes in other balance sheet accounts.DEPRECIATION AND CASH FLOW89. Note that we added depreciation back to operating cash flow and to additions to fixed assets.Why add it back twice? Isn’t this double-counting?In both cases, depreciation is added back because it was previously subtracted when obtaining ending balances of net income and fixed assets. Also, since depreciation is a noncash expense, we need to add it back in both instances, so there is no double counting. TAX LIABILITIES AND CASH FLOW90. Sometimes when businesses are critically delinquent on their tax liabilities, the tax authoritycomes in and literally seizes the business by chasing all of the employees out of the building and changing the locks. What does this tell you about the importance of taxes relative to our discussion of cash flow? Why might a business owner want to avoid such an occurrence?Taxes must be paid in cash, and in this case, they are one of the most important components of cash flow. The reputation of a business can undergo irreparable harm if word gets out that the tax authorities have confiscated the business, even if only for a couple of hours until the business owner can come up with the money to clear up the tax problem. The bottom line。
财金英语教程参考答案
财金英语教程参考答案Chapter 1: Introduction to Finance1. What is finance?- Finance is the management of money and includesactivities such as investing, borrowing, lending, budgeting, saving, and forecasting.2. What are the three main functions of finance?- The three main functions of finance are planning, acquiring, and managing financial resources.3. What is the time value of money?- The time value of money is the concept that a sum of money is worth more now than the same sum in the future dueto its potential earning capacity.4. How does inflation affect the value of money?- Inflation erodes the purchasing power of money over time, meaning that the same amount of money will buy fewer goodsand services in the future.5. What is the difference between a bond and a stock?- A bond is a debt instrument where an investor lends money to an entity in exchange for interest payments, while a stock represents ownership in a company and offers thepotential for capital gains and dividends.Chapter 2: Financial Statements1. What are the four main financial statements?- The four main financial statements are the balance sheet, income statement, cash flow statement, and statement of changes in equity.2. What is the purpose of a balance sheet?- The balance sheet provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and equity.3. How is net income calculated?- Net income is calculated by subtracting all expensesfrom the total revenue of a company during a specific period.4. What does the cash flow statement show?- The cash flow statement shows the inflow and outflow of cash within a business over a period of time, categorizedinto operating, investing, and financing activities.5. What is the statement of changes in equity?- The statement of changes in equity shows the changes in the equity accounts of a company over a period of time, including retained earnings, capital contributions, and other comprehensive income.Chapter 3: Financial Analysis1. What are the main types of financial analysis?- The main types of financial analysis are ratio analysis,horizontal analysis, vertical analysis, and trend analysis.2. What is the purpose of ratio analysis?- Ratio analysis is used to evaluate a company's financial health by comparing various financial ratios such asliquidity, profitability, and leverage ratios.3. What is horizontal analysis?- Horizontal analysis involves comparing financial statement items over multiple periods to identify trends and changes in performance.4. What is vertical analysis?- Vertical analysis, also known as common-size analysis,is a method of financial statement analysis where each itemis expressed as a percentage of a base figure, typicallytotal assets or total revenue.5. What is trend analysis?- Trend analysis involves examining the historical data of financial metrics over time to predict future trends and performance.Chapter 4: Risk Management1. What is risk management?- Risk management is the process of identifying, assessing, and prioritizing potential risks to an investment or project, and taking steps to mitigate or avoid these risks.2. What are the types of risks in finance?- The types of risks in finance include market risk,credit risk, liquidity risk, operational risk, and legal risk.3. What is diversification?- Diversification is a risk management strategy that involves spreading investments across various financial instruments, industries, or geographic regions to reduce overall risk.4. What is hedging?- Hedging is a risk management technique used to reducethe risk of price fluctuations in an asset by taking an offsetting position in a related security.5. What is the role of insurance in risk management?- Insurance is a risk management tool that providesfinancial protection against potential losses or damages by transferring the risk to an insurance company in exchange for a premium.Chapter 5: Investment Strategies1. What are the different types of investment strategies?- Types of investment strategies include passive investing, active investing, value investing, growth investing, and income investing.2. What is the difference between passive and active investing?- Passive investing involves a "set it and forget it" approach, typically using index funds, while active investingrequires regular buying and selling of individual securities based on market research and analysis.3. What is value investing?- Value investing is an investment strategy that involves buying stocks that are considered undervalued by the market, with the expectation that their true value will eventually be recognized.4. What is growth investing?- Growth investing focuses on companies that are expected to grow at an above-average rate compared to the market, often investing in companies with strong competitive advantages and high growth potential.5. What is income investing?- Income investing is an investment strategy aimed at generating a steady stream of income from investments, typically through dividends or interest payments.Chapter 6: International Finance1. What is international。
Financial_Statements
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Figure 2.2 Income Statement example
2. Use the cash flow identity to explain cash flow.
3. Provide some context for financial reporting.
4. Recognize and view Internet sites that provide financial information.
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2.2 (A) The First Component: Cash Flow From Assets (continued)
• Putting it all together…. • Cash flow from Assets = OCF – NCS - ∆ NWC =$7,287-$2,579-$1,222 =$3,486
• Cash flow from assets = OCF – NCS - ∆NWC
OCF = EBIT + Depreciation – Taxes NCS = End. Net – Beg. Net + Depreciation Fixed Assets Fixed Assets ∆NWC=Ending NWC – Beginning NWC
chapter_2_financial_statements
This lesson plan will be split into two classes.Chapter 2Financial Statements, Taxes, and Cash FlowBalance Sheet∙Assets = Liabilities + Shareholder’s Equityo A balance sheet does exactly what it means – everything must be equal – it balanceso If a firm raises more money by issuing stock then the firm’s assets will also increase because that money has to go somewhere. Or a firm could raise money by issuing stockand use that money to pay off its debts or liabilities.∙Organization of what the firm OWNS (assets), what it OWES (liabilities), and the DIFFERENCE (shareholder’s equity) between the two1st of 3 items on the balance sheet is ASSETS∙Assets are put into two categories:o Current– will only be an asset for a year or less. After a year, that asset will be converted to cash.▪Inventory is a current asset – as soon as a firm makes a product it goes to thestore and then is bought. After a product is purchased that firm receives cash.o Fixed– fixed assets can be thought of an asset that has a long-life. An example would be machinery▪Tangible –it means you can touch it. Trucks, computers▪Intangibles –trademark or a patent2nd of 3 items on the balance sheet is LIABILITIES∙Liabilities are put into two categories:o Current– same concept as a CURRENT ASSET: that liability must be paid within one year) ▪Accounts Payable is a current liability –AP is the method company’s use to paytheir suppliers. The supplier will mail the bill to the company. The companythen has a certain amount of time to pay that bill in full.o Long-term Liability –debt that does not come due within a year3rd of 3 items on the balance sheet is SHAREHOLDER’S EQUITY∙Mentioned before that shareholder’s equity is the difference between assets and liabilities∙Reflects the fact that should a firm sell all of its assets and use the money to pay off its debts, then whatever remains belongs to the shareholders∙In the case of a company going bankrupt the bond holders get first claim on what is left of the company (they are in contract). After all of the bondholders have been paid, IF there is anything left that will go to the shareholders∙That’s why stocks are a riskier investment than bonds∙SHAREHOLDER’S EQUITY = ASSETS - LIABILITIESLiquidity∙Liquidity refers to the speed and ease with which an asset can be converted to cash o Give example of factory machine versus cash holdings∙ 2 things associated with liquidityo Ease of conversion – how easy is it for me to get cash for this?o Loss of value – how much do I have to lower the price before I can get cash for this?∙ A highly liquid asset is one that can quickly be sold without having to lose money∙An illiquid asset is one that I cannot sell quickly at the current price. For anyone to buy my asset,I have to lower the price by a lot before someone will want it. Illiquid means cash is not easy toget.On the balance sheet, assets are listed in order of decreasing liquidity, meaning that the most liquid, the assets we can get cash for quickly, are listed first.∙Current Assets are liquid. They include cash and assets that we expect to convert to cash over the next year∙If an asset is liquid and it can be easily converted into money – then think of liquidity as valuable.∙The more liquid a business is, less likely it is to experience financial distress. If a business has a lot of debt coming due, but cannot easily convert its assets to cash to pay those debts then thecompany will be in trouble.There is a downside to liquid assets∙They are less profitable to hold∙If a company has a lot of cash holdings – are they earning any money with that cash? Not much.∙Trade-off between the advantages of liquidity and potential earningsMarket Value versus Book Value∙Market value –the amount of cash we would get if we sold the asset. Also called its true value.∙Book value –the value of assets which are shown on the book – generally do not show an assets true wortho What this means is that assets are reported on the balance sheet at what the firm paid for them, no matter how long ago they were purchased or how much they are worthtodayo Can also think of book value as historical cost∙The market value will not be found on the balance sheet – makes no connection between the total asset costs and market value of the firmo Same goes for the equity value. What is printed on the balance sheet is not always the true market value of the equity. Market value is what is more important.Which is more important in the decision making process?The Income Statement∙The income statement measures performance over some period of time∙Revenues – Expenses = Net Income∙Recognition principle –is to recognize revenue at the time of saleo When a sale is made, does that mean that the company immediately collects that money?∙Matching principle –the idea is to first determine revenues and then match those revenues with the costs associated with producing them∙Therefore, numbers on the income statement may not be accurate in showing the real cash inflows and outflowsNon-cash items– expenses charged against revenues that do not directly affect the cash flow ∙Depreciation is most common non-cash item.o If a firm buys a factory machine for 2,000 RNB it will pay that in cash. If it pays it in cash, then in reality the company has a cash outflow at that time of purchase. But on theincome statement, the company will depreciate the asset over a certain time period andmake small deductions a little bit at a time.o Can think of depreciation as another form of the matching principle. The revenues from purchasing an asset occur overtime and not right away. So depreciation is a way ofmatching the expense of an asset with benefits from owning it.Cash FlowWhen I saw cash flow, it simply means the difference between money coming in and the number going out.∙Recall the formula Assets = Liabili ties + Shareholder’s Equity∙Same goes for cash flow: Cash flow from Assets = Cash flow to creditors + Cash flow to stockholders∙Our focus: how cash is generated from the use of assets and how it is paid to those who finance the asset purchaseCash Flow from Assets∙Involves 3 components:**When going over examples DO NOT erase the answers!o Operating Cash Flow –cash flow that results from the firm’s day-to-day activities of producing and selling▪When calculating OCF we want to calculate Revenues – Costs. But, we don’twant to include depreciation because it isn’t a cash outflow. And we don’t wantto include interest because that is an expense that is associated with financingand not day-to-day operations. However, taxes are included because they arepaid in cash.▪Go Over Example of Calculations.∙EBIT + Depreciation (not cash flow) – Taxes (taxes are paid out) = OCF ▪OCF tells us whether or not a firm’s cash inflows are enough to cover cashoutflows. So a negative OCF is a sign of trouble.o Capital Spending –is the net spending on fixed assets, meaning how much assets we spent buying fixed assets – how much money we received from selling our assets.Purchases – Sales.▪Go Over Example of Calculations∙Ending Net Fixed Assets – Beginning Net Fixed Assets + Depreciation =Net Investment on Fixed Assetso Change in Net Working Capital –NWC is defined as the difference between Current Assets and Current Liabilities. So NWC = Current Assets – Current Liabilities. Think of itlike, how much capital (or assets) does the company have to work with.▪What we are trying to figure out with NWC is – will the cash that we will receive within the next 12 months be more than the cash that will go out to pay ourliabilities within the next 12 months.▪The CHANGE in NWC is = Ending NWC – Beginning NWC∙Or [(Current Assets in Year 2 – Current Liabilities in Year 2) – (CurrentAssets in Year 1 – Current Liabilities in Year 1)]▪Go Over ExampleCash Flow from Assets = OCF – Net Capital Spending – Change in Net Working Capital ∙If negative, than that means the firm raised more money by borrowing and selling stock than it paid out to the bondholders and stockholders. Not uncommon for growing companies.∙Cash Flow From Assets can also be called Free Cash Flow – meaning that the money left over from operations after it is spent on fixed assets and paying current liabilities is FREE for the firm to decide what to do with it.Cash Flow to Creditors and StockholdersCash Flow to Creditors –the interest paid – net new borrowing∙The interest paid is found on the income statement. Net new borrowing is the Ending Long-term Debt – Beginning Long-term DebtCash Flow to Stockholders –dividends paid – net new equity raised∙Dividends paid is found on the income statement. Net New Equity Raised is Ending Common Stock – Beginning Common StockOn Day 2: Review last class. Clarify terms such as depreciation, what “net” means, and working capital.∙Continue with the material that is left over.∙Have them do the case in class in groups.∙Go over the case if there is time, or have them finish it for homework.。
chapter 2 FINANCIAL STATEMENTS
Using the relations between A & B，net income can be determined by changes in financial position made during the period after reconciling transactions，net income：
Accrual basis of accounting
Revenue is recognized when earned and expenses are recorded when incurred
Most companies use it
• However，cash basis is an inappropriate accounting basis when considerable incongruence exist between cash inflows/outflows and the time the company sells/purchases the related items. • So, the difference between them is that accrual basis means that transactions affecting a company` s financial statements are recorded in the period in which they occur，cash basis means when the company actually receives or pays cash.
Example 2-1 P21-24
Accounts Cash Accounts Receivable Office Supplies Office Equipment Accounts Payable Owners` Equity Assets
公司理财第九版课后习题答案第二章
CHAPTER 2FINANCIAL STATEMENTS AND CASH FLOWAnswe rs to Concepts Review and Critical Thinking Questions1. True. Every asset can be converted to cash at some price. However, when we are referring to a liquidasset, the added assumption that the asset can be quickly converted to cash at or near market value is important.2. The recognition and matching principles in financial accounting call for revenues, and the costsassociated with producing those revenues, to be ―booked‖when the revenue process isessentiallycomplete, not necessarily when the cash is collected or bills are paid. Note that this way is notnecessarily correct; it‘s the way accountants have chosen to do it.3. The bottom line number shows the change in the ca sh balanc e on the balance sheet. As such, it is nota use ful number for analyzing a company.4. The major difference is the treatment of interest expense. The accounting statement of cash flowstreats interest as an operating ca sh flow, while the financial ca sh flows treat interest as a financing cash flow. The logic of the accounting statement of cash flows is that since interest appears on the income statement, which shows the operations for the period, it is an operating cash flow. In reality, interest is a financing expense, which results from the company‘s choice of debt and equity. We will have more to say about this in a later chapter. When compa ring the two c ash flow statements, thefinancial statement of cash flows is a more appropriate measure of the company‘s performa ncebecause of its treatment of interest.5. Market values can never be negative. Imagine a share of stock selling for –$20. This would meanthat if you placed an order for 100 shares, you would get the stock along with a check for $2,000.How ma ny shares do you want to buy? More generally, because of corpora te andindividualbankruptcy laws, net worth for a person or a corporation cannot be negative, implying that liabilities cannot exceed assets in market value.6. For a successful c ompany that is rapidly expanding, for example, capital outlays will be large,possibly leading to negative c ash flow from assets. In general, what matters is whether the money is spent wisely, not whe ther cash flow from assets is positive or negative.7. It‘s probably not a good sign for an e stablished company to have negative cash flow from operations,but it would be fairly ordinary for a start-up, so it depends.would have this effect. Negative net c apital spending would mea n more long-lived assets wereliquidated than purchased.49.10. If a company raises more money from selling stock than it pays in dividends in a particular period,its cash flow to stockholders will be negative. If a company borrows more than it pays in interest and principal, its cash flow to creditors will be negative.The adjustments discussed were purely accounting changes; they had no cash flow or market value consequences unless the new accounting information caused stockholders to revalue the derivatives.Solutions to Questions and Proble msNOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiplesteps. Due to space and readability constraints, when these intermediate steps are included in thissolutions manual, rounding may appear to have occurred. However, the final answer for each problem is found without rounding during any step in the problem.Basic1. To find owners‘ equity, we must construct a balance sheet as follows:Balance SheetCA $ 5,300 CL $ 3,900NFA 26,000 LTD 14,200OE ??TA $31,300 TL & OE $31,300We know that total liabilities and owners‘ equity (TL & OE) must equal total assets of $31,300. We also know that TL & OE is equal to current liabilities plus long-term debt plus owner‘s equity, soowner‘s equity is:OE = $31,300 –14,200 – 3,900 = $13,200NWC = CA – CL = $5,300 – 3,900 = $1,4002. The income statement for the company is:Income StatementSales $493,000Costs 210,000Depreciation 35,000EBIT $248,000Interest 19,000EBT $229,000Taxes 80,150Net income $148,8503.4.5.6. One equation for net income is:Net income = Dividends + Addition to retained earningsRearranging, we get:Addition to retained earnings = Net income – Divide ndsAddition to retained earnings = $148,850 – 50,000Addition to retained earnings = $98,850To find the book value of current assets, we use: NWC = CA – CL. Rearranging to solve for current assets, we get:CA = NWC + CL = $800,000 + 2,100,000 = $2,900,000The market value of current assets and net fixed assets is given, so:Book value CA= $2,900,000 Market value CA= $2,800,000Book value NFA = $5,000,000 Market value NFA= $6,300,000Book value assets = $7,900,000 Market value assets= $9,100,000Taxes = 0.15($50K) + 0.25($25K) + 0.34($25K) + 0.39($246K – 100K)Taxes = $79,190The average tax ra te is the total tax paid divided by net income, so:Average tax rate = $79,190 / $246,000Average tax rate = 32.19%The marginal tax rate is the tax rate on the next $1 of earnings, so the marginal tax ra te = 39%.To calculate OCF, we first need the income state ment:Income StatementSales $14,900Costs 5,800Depreciation 1,300EBIT $7,800Interest 780Taxable income $7,020Taxes 2,808Net income $4,212OCF = EBIT + Depreciation – TaxesOCF = $7,800 + 1,300 – 2,808OCF = $6,292Net capital spending = $1,730,000 – 1,650,000 + 284,000Net capital spending = $364,0007. The long-term debt account will increase by $10 million, the amount of the new long-term debt issue.Since the company sold 10 million new shares of stock with a $1 par value, the common stockaccount will increase by $10 million. The capital surplus account will increase by $33 million, thevalue of the new stoc k sold above its par value. Since the company had a net income of $9million,and pa id $2 million in dividends, the addition to retained earnings was $7 million, which willinc rease the accumulated retained earnings account. So, the new long-term debt a nd stockholders‘ equity portion of the balance sheet will be:Long-term debt $82,000,000Total long-term debt $82,000,000Shareholders equityPreferred stock $9,000,000Common stock ($1 par value) 30,000,000Ac cumulated retained earnings 104,000,000Capital surplus 76,000,000Total equity $ 219,000,000Total Liabilities & Equity $ 301,000,0008.9. Cash flow to creditors = Interest paid – Net new borrowingCash flow to creditors = $118,000 – ($1,390,000 – 1,340,000)Cash flow to creditors = $118,000 – 50,000Cash flow to creditors = $68,000Cash flow to stockholders = Dividends paid – Net new equityCash flow to stockholders = $385,000 – [(Common+ APIS) – (Common+ APIS)]end end beg beg10. Cash flow to stockholders = $385,000 – [($450,000 + 3,050,000) – ($430,000 + 2,600,000)] Cash flow to stockholders = $385,000 – ($3,500,000 – 3,030,000)Cash flow to stockholders = –$85,000Note, APIS is the additional paid-in surplus.Cash flow from assets= Cash flow to creditors + Cash flow to stockholders= $68,000 – 85,000= –$17,000Cash flow from assets= –$17,000 = OCF – Change in NWC – Net capital spending–$17,000 = OCF – (–$69,000) – 875,000Operating cash flowOperating cash flow= –$17,000 – 69,000 + 875,000= $789,000Cash flow to creditors = $118,000 – (LTD– LTD)11. a. IntermediateThe accounting statement of cash flows explains the change in cash during the year. Theaccounting statement of cash flows will be:Statement of cash flowsOperationsNet income $105Depreciation 90Changes in other current assets (55)Accounts payable (10)Total cash flow from operations $170Investing activitiesAcquisition of fixed assets $(140)Total cash flow from investing activities $(140)Financing activitiesProc eeds of long-term debt $30Dividends (45)Total cash flow from financing activities ($15)Change in cash (on balance sheet) $15b.Change in NWC= NWC e nd– NWC beg= (CA end–CL en d ) – (CA beg–CL be g)c.= [($50 + 155) – 85] – [($35 + 140) – 95)= $120 – 80= $40To find the cash flow generated by the firm‘s assets, we need the operating cash flow, and thecapital spending. So, calculating each of these, we find:Operating cash flowNet income $105Depreciation 90Operating cash flow $195Note that we can calculate OCF in this manner since there a re no taxes.Capital spendingEnding fixed assets Beginning fixed assets DepreciationCapital spending $340 (290)90 $140Now we c an calculate the cash flow gene rated by the firm‘s assets, which is: Cash flow from assetsOperating cash flow Capital spending Change in NWC Cash flow from assets $195 (140) (40) $1512. With the information provided, the cash flows from the firm are the capital spending and the changein net working capital, so:Cash flows from the firmCapital spending $(15,000)Additions to NWC (1,500)Cash flows from the firm $(16,500)And the cash flows to the investors of the firm are:Cash flows to investors of the firmSale of long-term debt (19,000)Sale of common stock (3,000)Dividends paid 19,500Cash flows to investors of the firm $(2,500)13. a.b. The interest expense for the company is the amount of debt times the interest rate on the debt. So, the income statement for the company is:Income StatementSales $1,200,000Cost of goods sold 450,000Selling costs 225,000Depreciation 110,000EBIT $415,000Interest 81,000Taxable income $334,000Taxes 116,900Net income $217,100And the opera ting cash flow is:OCF = EBIT + Depreciation – TaxesOCF = $415,000 + 110,000 – 116,900OCF = $408,10014. To find the OCF, we first calculate net income.Income StatementSales $167,000Costs 91,000Depreciation 8,000Other expe nses 5,400EBIT $62,600Interest 11,000Taxable income $51,600Taxes18,060Net income $33,540Dividends $9,500Additions to RE $24,040a.OCF = EBIT + Depreciation – TaxesOCF = $62,600 + 8,000 – 18,060OCF = $52,540b.CFC = Interest – Net new LTDCFC = $11,000 – (–$7,100)CFC = $18,100Note that the net new long-term debt is negative because the compa ny repaid part of its long-term debt.c.CFS = Dividends – Net new equityCFS = $9,500 – 7,250CFS = $2,250d.We know that CFA = CFC + CFS, so:CFA = $18,100 + 2,250 = $20,350CFA is also equal to OCF – Net capital spending – Change in NWC. We already know OCF.Net capital spending is equal to:Net capital spending = Increase in NFA + De preciationNet capital spending = $22,400 + 8,000Net capital spending = $30,400Now we c an use:CFA = OCF – Net capital spending – Change in NWC$20,350 = $52,540 – 30,400 – Change in NWC.Solving for the change in NWC gives $1,790, me aning the company increased its NWC by$1,790.15. The solution to this question works the income statement backwards. Starting at the bottom:Net income = Dividends + Addition to ret. earningsNet income = $1,530 + 5,300Net income = $6,830Now, looking at the income statement:EBT – (EBT × Tax rate) = Net incomeRecognize that EBT × tax rate is simply the calculation for ta xes. Solving this for EBT yields: EBT = NI / (1– Tax rate)EBT = $6,830 / (1 – 0.65)EBT = $10,507.69Now we can calculate:EBIT = EBT + InterestEBIT = $10,507.69 + 1,900EBIT = $12,407.69The last step is to use:EBIT = Sales – Costs – Depreciation$12,407.69 = $43,000 – 27,500 – DepreciationDepreciation = $3,092.31Solving for depreciation, we find that depreciation = $3,092.3116. The balance sheet for the company looks like this:Balance SheetCash $183,000 Accounts payableAc counts receivable 138,000 Notes payableInventory 297,000 Current liabilitiesCurrent assets $618,000 Long-term debtTotal liabilities Tangible net fixed assets 3,200,000Intangible net fixed assets 695,000 Common stockAccumulated ret. earnings Total assets $4,513,000 Total liab. & owners‘ equity Total liabilities and owners‘ equity is:TL & OE = Total debt + Common stock + Accumulated retained earnings Solving for this equation for equity gives us:Common stock = $4,513,000 – 1,960,000 – 2,160,000Common stock = $393,000$465,000145,000 $610,000 1,550,000 $2,160,000?? 1,960,000 $4,513,00017.18.19. The market value of shareholders‘ equity cannot be negative. A negative market value in this casewould imply that the company would pay you to own the stock. The market value of sha reholders‘ equity can be stated as: Shareholders‘ equity = Max [(TA –TL), 0]. So, if TA is $9,700, equity isequal to $800, and if TA is $6,800, e quity is equal to $0. We should note here that while the market value of equity cannot be negative, the book value of shareholders‘ equity can be negative.a.Taxes Growth= 0.15($50K) + 0.25($25K) + 0.34($3K) = $14,770Taxes Income= 0.15($50K) + 0.25($25K) + 0.34($25K) + 0.39($235K) + 0.34($7.465M)= $2,652,000b. Each firm has a marginal tax rate of 34% on the next $10,000 of taxa ble income, despite theirdifferent average ta x rates, so both firms will pay an additional $3,400 in taxes.Income State mentSales $740,000COGS 610,000A&S expenses 100,000Depreciation 140,000EBIT ($115,000)Interest 70,000Taxable income ($185,000)Taxes (35%) 0 income ($185,000)b.OCF = EBIT + Depreciation – TaxesOCF = ($115,000) + 140,000 – 0OCF = $25,00020.21. c. Net income was negative because of the tax deductibility of depreciation and interest expense.However, the actual cash flow from operations wa s positive because de preciation is a non-cashexpense and interest is a financing expense, not an operating expense.A firm can still pay out dividends if net income is negative; it just has to be sure there is sufficientcash flow to make the dividend payments.Change in NWC = Net ca pital spending = Net new equity = 0. (Given)Cash flow from assets = OCF – Change in NWC – Net capital spendingCash flow from assets = $25,000 – 0 – 0 = $25,000Cash flow to stockholders = Divide nds – Net new equityCash flow to stockholders = $30,000 – 0 = $30,000Cash flow to creditors = Cash flow from assets – Cash flow to stockholdersCash flow to creditors = $25,000 – 30,000Cash flow to creditors = –$5,000Cash flow to creditors is also:Cash flow to creditors = Interest – Net new LTDSo:Net new LTD = Interest – Cash flow to creditorsNet new LTD = $70,000 – (–5,000)Net new LTD = $75,000a. The income statement is:Income StatementSales $15,300Cost of good sold 10,900Depreciation 2,100EBIT $ 2,300Interest 520Taxable income $ 1,780Taxes712Net income $1,068b.OCF= EBIT + Depreciation – TaxesOCF = $2,300 + 2,100 – 712OCF = $3,68813c. Change in NWC=NWC end– NWC beg= (CA end–CL en d ) – (CA beg–CL be g)22.= ($3,950 – 1,950) – ($3,400 – 1,900)= $2,000 – 1,500 = $500Ne t capital spending= NFA end– NFA beg+ Depreciation= $12,900 – 11,800 + 2,100= $3,200CFA= OCF – Change in NWC – Net capital spending= $3,688 – 500 – 3,200= –$12The cash flow from assets can be positive or ne gative, since it represents whether the firm raisedfunds or distributed funds on a net basis. In this problem, even though net income and OCF arepositive, the firm invested heavily in both fixed assets and net working capital; it had to raise a net $12 in funds from its stockholders and creditors to make these investments.d. Ca sh flow to creditors= Interest – Net new LTD= $520 – 0= $520Ca sh flow to stoc kholders = Cash flow from assets – Cash flow to creditors= –$12 – 520= –$532We can also calculate the cash flow to stockholders as:Ca sh flow to stoc kholders = Dividends – Ne t new equitySolving for net new equity, we get:Net new equity= $500 – (–532)= $1,032The firm had positive earnings in an accounting sense (NI > 0) and had positive cash flow fromoperations. The firm invested $500 in new net working capital and $3,200 in new fixed assets. The firm had to raise $12 from its stakeholders to support this new inve stment. It accomplished this by raising $1,032 in the form of new equity. After paying out $500 of this in the form of dividends to shareholders and $520 in the form of interest to creditors, $12 was left to meet the firm‘s ca sh flow needs for investment.a. Total assets 2009= $780 + 3,480 = $4,260Total liabilities 2009= $318 + 1,800 = $2,118Owners‘ equity 2009 = $4,260 – 2,118 = $2,142Total assets 2010= $846 + 4,080 = $4,926Total liabilities 2010= $348 + 2,064 = $2,412Owners‘ equity 2010= $4,926 – 2,412 = $2,51414b. NWC 2009NWC 2010Change in NWC = CA09 – CL09 = $780 – 318 = $462= CA10 – CL10 = $846 – 348 = $498= NWC10 – NWC09 = $498 – 462 = $36c.d. We can calculate net capital spe nding as:Net capital spending = Net fixed assets 2010 – Net fixed assets 2009 + Deprec iationNet capital spending = $4,080 – 3,480 + 960Net capital spending = $1,560So, the company had a net capital spending cash flow of $1,560. We also know that net capital spending is:Net capital spending = Fixed assets bought – Fixed assets sold$1,560= $1,800 – Fixed assets soldFixed assets sold= $1,800 – 1,560 = $240To c alculate the cash flow from assets, we must first calculate the operating cash flow. Theoperating cash flow is calculated as follows (you can also prepare a traditional incomestatement):EBIT = Sales – Costs – DepreciationEBIT = $10,320 – 4,980 – 960EBIT = $4,380EBT = EBIT – InterestEBT = $4,380 – 259EBT = $4,121Taxes = EBT ⨯ .35Taxes = $4,121 ⨯ .35Taxes = $1,442OCF = EBIT + Depreciation – TaxesOCF = $4,380 + 960 – 1,442OCF = $3,898Ca sh flow from a ssets = OCF – Change in NWC – Net capital spending.Ca sh flow from a ssets = $3,898 – 36 – 1,560Ca sh flow from a ssets = $2,302Net new borrowing = LTD10 – LTD09Net new borrowing = $2,064 – 1,800Net new borrowing = $264Ca sh flow to creditors = Interest – Net ne w LTDCa sh flow to creditors = $259 – 264Ca sh flow to creditors = –$5Net new borrowing = $264 = Debt issue d – Debt retiredDebt retired = $360 – 264 = $961523.CashAccounts receivable InventoryCurrent assetsNet fixed assets Total assetsCashAccounts receivable InventoryCurrent assetsNet fixed assets Total assets Balance sheet as of Dec. 31, 2009$2,739 Accounts payable3,626 Notes payable6,447 Current liabilities$12,812Long-term debt$22,970 Owners' equity$35,782 Total liab. & equityBalance sheet as of Dec. 31, 2010$2,802Accounts payable4,085 Notes payable6,625Current liabilities$13,512Long-term debt$23,518Owners' equity$37,030Total liab. & equity$2,877529$3,406$9,173$23,203$35,782$2,790497$3,287$10,702$23,041$37,03024.2009 Income StatementSales $5,223.00COGS 1,797.00Othe r expenses 426.00Depreciation 750.00EBIT $2,250.00Interest 350.00EBT $1,900.00Taxes646.00Net income $1,254.00Dividends $637.00Additions to RE 617.00OCF = EBIT + Depreciation – TaxesOCF = $2,459 + 751 – 699.38OCF = $2,510.62Change in NWC = NWC end– NWC beg= (CA – CL)end2010 Income StatementSales $5,606.00COGS 2,040.00Other expense s 356.00Depreciation 751.00EBIT $2,459.00Interest 402.00EBT $2,057.00Taxes699.38Net income $1,357.62Dividends $701.00Additions to RE 656.62– (CA – CL)begChange in NWC = ($13,512 – 3,287) – ($12,812 – 3,406)Change in NWC = $819Net capital spending = $23,518 – 22,970 + 751Net capital spending = $1,29916Net capital spending = NFA– NFA+ Depreciation25. Cash flow from assets = OCF – Change in NWC – Net capital spendingCash flow from assets = $2,510.62 – 819 – 1,299Cash flow from assets = $396.62Cash flow to creditors = Interest – Net new LTDNet new LTD = LTD end– LTD begCash flow to creditors = $402 – ($10,702 – 9,173)Cash flow to creditors = –$1,127Common stock + Retained earnings = Total owners‘ equityNet new equity = (OE – RE)end– (OE – RE)begRE end= RE beg+ Additions to RENet new equity = $23,041 – 23,203 – 656.62 = –$818.62Cash flow to stockholders = Dividends – Net new equityCash flow to stockholders = $701 – (–$818.62)Cash flow to stockholders = $1,519.62As a check, ca sh flow from assets is $396.62.Cash flow from assets = Cash flow from creditors + Cash flow to stockholdersCash flow from assets = –$1,127 + 1,519.62Cash flow from assets = $392.62ChallengeWe will begin by calculating the operating cash flow. First, we need the EBIT, which c an becalculated as:EBIT = Net income + Current taxes + Deferred taxes + Inte restEBIT = $144 + 82 + 16 + 43EBIT = $380Now we can calculate the operating cash flow as:Operating cash flowEarnings before interest and taxes $285Depreciation 78Current taxes (82)Operating cash flow $28117Net new equity = Common stock– Common stockNet new equity = OE– OE+ RE– RE∴ Net new equity= OE– OE+ RE– (RE+ Additions to RE)= OE– OE– Additions to REThe cash flow from assets is found in the investing activities portion of the accounting statement of cash flows, so:Cash flow from assetsAcquisition of fixed a ssets $148Sale of fixed assets (19)Capital spending $129The net working capital cash flows are all found in the operations cash flow section of theaccounting statement of cash flows. However, instead of c alculating the net working capital cashflows as the change in net working capital, we must calculate each item individually. Doing so, wefind:Net working capital cash flowCash $42Accounts receivable 15Inventories (18)Accounts payable (14)Accrued expenses 7Notes payable (5)Other (2)NWC cash flow $25Except for the interest expense and note s payable, the ca sh flow to creditors is found in the financing activities of the accounting statement of cash flows. The inte rest expense from the income statementis given, so:Cash flow to creditorsInterest $43Retirement of debt 135Debt service $178Proceeds from sale of long-term debt (97)Total $81And we can find the cash flow to stockholders in the financing se ction of the accounting stateme nt of cash flows. The cash flow to stockholders was:Cash flow to stockholdersDividends $ 72Repurchase of stock 11Cash to stockholders $ 83Proceeds from new stock issue(37)Total $ 461826. Net capital spending= (NFA– NFA + Depreciation) + (Depreciation + AD) – AD= (NFA+ AD) – (NFA+ ADbeg) =FAbeg– FAend end beg beg end beg27. a.b.c. The tax bubble causes average tax rates to catch up to marginal tax rates, thus eliminating the tax advantage of low marginal rates for high inc ome corporations.Assuming a taxable income of $335,000, the taxes will be:Taxes = 0.15($50K) + 0.25($25K) + 0.34($25K) + 0.39($235K) = $113.9KAverage tax rate = $113.9K / $335K = 34%The marginal tax rate on the next dollar of income is 34 percent.For corporate taxable income levels of $335K to $10M, average tax rates are equal to marginal tax rates.Taxes = 0.34($10M) + 0.35($5M) + 0.38($3.333M) = $6,416,667Average tax rate = $6,416,667 / $18,333,334 = 35%The marginal tax rate on the ne xt dollar of income is 35 percent. For corporate taxable income levels over $18,333,334, ave rage tax rates are again e qual to marginal tax rates.Taxes= 0.34($200K) = $68K = 0.15($50K) + 0.25($25K) + 0.34($25K) + X($100K);X($100K)= $68K – 22.25K = $45.75KX= $45.75K / $100KX= 45.75%19=NFA– NFAend= (NFAbeg– NFA)+ AD– AD。
公司理财罗斯英文原书第九版第二章
Financial Statements and Cash Flow
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
Key Concepts and Skills
Usually a separate section reports the amount of taxes levied on income.
$86 $43 $43
2-13
U.S.C.C. Income Statement
Total operating revenues Cost of goods sold Selling, general, and administrative expenses Depreciation Operating income Other income Eห้องสมุดไป่ตู้rnings before interest and taxes Interest expense Pretax income Taxes Current: $71 Deferred: $13 Net income Retained earnings: Dividends: $2,262 1,655 327 90 $190 29 $219 49 $170 84
Deferred taxes Long-term debt Total long-term liabilities $117 471 $588 $104 458 $562
Total assets
$1,879
$1,742
Stockholder's equity: Preferred stock $39 $39 Common stock ($1 par value) 55 32 Capital surplus 347 327 Accumulated retained earnings 390 347 Less treasury stock (26) (20) Total equity $805 $725 Total liabilities and stockholder's equity $1,879 $1,742
会计学企业决策的基础chapter2 答案
(5)(6)(7)(8)(9)Owner’s equity is not valued at either the original amountinvested or at the estimated market value of the business. In fact, owner’s equity cannot be valued independently of the values assigned to assets and liabilities. Rather, it is a residual figure—the excess of total assets over totalliabilities. (If liabilities exceed assets, owners' equity would be a negative amount.) Thus the amount of Berkeley's capital should be determined by subtracting the corrected figure for total liabilities ($23,100) from the corrected amount of total assets ($51,500). This indicates owners'equity of $28,400.The $22,400 described as “Other assets” is not an asset,because there is no valid legal claim or any reasonable expectation of recovering the income taxes paid. Also, the payment of federal income taxes by Pippin was not abusiness transaction by Big Screen Scripts. If a refund were obtained from the government, it would come to Pippin personally, not to the business entity.The proper valuation for the land is its historical cost of$39,000, the amount established by the transaction in which the land was purchased. Although the land may have acurrent fair value in excess of its cost, the offer by the friend to buy the land if Pippin would move the building appears to be mere conversation rather than solid, verifiable evidence of the fair value of the land. The "cost principle," although less than perfect, produces far more reliable financial statements than would result if the owners could "pull figures out of the air" in recording asset values.The accounts payable should be limited to the debts of the business, $32,700, and should not include Pippin’s personal liabilities.The amount owed to stagehands for work done throughSeptember 30 is the result of completedtransactions and should be included among the liabilities of the business. Even if agreement hasbeen reached with Mario Dane for her to perform in a future play, he has not yet performedand therefore, is not yet owed any money. Thus, this $25,000 is not yet a liability of thebusiness.therefore cannot be included in the assets. To do so would cause an overstatement of both assets and owners’ equity.The “Office furniture” amount must be reduced by $2,525.invested or at the estimated market value of the business. In fact, owner’s equity cannot be valued independently of the values assigned to assets and liabilities. Rather, it is a residual figure—the excess of total assets over total liabilities. (If liabilities exceed assets, owners' equity would be a negative amount.) Thus the amount of Berkeley's capital should be determined by subtracting the corrected figure for total liabilities ($23,100) from the corrected amount of total assets ($51,500). This indicates owners' equity of $28,400.。
Cha02 罗斯公司理财第九版原版书课后习题
reported in the financing activity section of the accounting statement of cash flows. When Tyco received payments from customers, the cash inflows were reported as operating cash flows. Another method used by Tyco was to have acquired companies prepay operating expenses. In other words, the company acquired by Tyco would pay vendors for items not yet received. In one case, the payments totaled more than $50 million. When the acquired company was consolidated with Tyco, the prepayments reduced Tyco’s cash outflows, thus increasing the operating cash flows.Dynegy, the energy giant, was accused of engaging in a number of complex “round-trip trades.” The round-trip trades essentially involved the sale of natural resources to a counterparty, with the repurchase of the resources from the same party at the same price. In essence, Dynegy would sell an asset for $100, and immediately repurchase it from the buyer for $100. The problem arose with the treatment of the cash flows from the sale. Dynegy treated the cash from the sale of the asset as an operating cash flow, but classified the repurchase as an investing cash outflow. The total cash flows of the contracts traded by Dynegy in these round-trip trades totaled $300 million.Adelphia Communications was another company that apparently manipulated cash flows. In Adelphia’s case, the company capitalized the labor required to install cable. In other words, the company classified this labor expense as a fixed asset. While this practice is fairly common in the telecommunications industry, Adelphia capitalized a higher percentage of labor than is common. The effect of this classification was that the labor was treated as an investment cash flow, which increased the operating cash flow.In each of these examples, the companies were trying to boost operating cash flows by shifting cash flows to a different heading. The important thing to notice is that these movements don’t affect the total cash flow of the firm, which is why we recommend focusing on this number, not just operating cash flow.Summary and ConclusionsBesides introducing you to corporate accounting, the purpose of this chapter has been to teach you how to determine cash flow from the accounting statements of a typical company.1. Cash flow is generated by the firm and paid to creditors and shareholders. It can be classifiedas:1. Cash flow from operations.2. Cash flow from changes in fixed assets.3. Cash flow from changes in working capital.2. Calculations of cash flow are not difficult, but they require care and particular attention to detailin properly accounting for noncash expenses such as depreciation and deferred taxes. It is especially important that you do not confuse cash flow with changes in net working capital and net income.Concept Questions1. Liquidity True or false: All assets are liquid at some price. Explain.2. Accounting and Cash Flows Why might the revenue and cost figures shown on a standardincome statement not represent the actual cash inflows and outflows that occurred during a period?3. Accounting Statement of Cash Flows Looking at the accounting statement of cash flows,what does the bottom line number mean? How useful is this number for analyzing a company? 4. Cash Flows How do financial cash flows and the accounting statement of cash flows differ?Which is more useful for analyzing a company?5. Book Values versus Market Values Under standard accounting rules, it is possible for astockholders’ equity of Information Control Corp. one year ago:During the past year, Information Control issued 10 million shares of new stock at a total price of $43 million, and issued $10 million in new long-term debt. The company generated $9 million in net income and paid $2 million in dividends. Construct the current balance sheet reflecting the changes that occurred at Information Control Corp. during the year.8. Cash Flow to Creditors The 2009 balance sheet of Anna’s Tennis Shop, Inc., showed long-term debt of $1.34 million, and the 2010 balance sheet showed long-term debt of $1.39 million.The 2010 income statement showed an interest expense of $118,000. What was the firm’s cash flow to creditors during 2010?9. Cash Flow to Stockholders The 2009 balance sheet of Anna’s Tennis Shop, Inc., showed$430,000 in the common stock account and $2.6 million in the additional paid-in surplus account.The 2010 balance sheet showed $450,000 and $3.05 million in the same two accounts, respectively. If the company paid out $385,000 in cash dividends during 2010, what was the cash flow to stockholders for the year?10. Calculating Cash Flows Given the information for Anna’s Tennis Shop, Inc., in the previoustwo problems, suppose you also know that the firm’s net capital spending for 2010 was $875,000 and that the firm reduced its net working capital investment by $69,000. What was the firm’s 2010 operating cash flow, or OCF?INTERMEDIATE (Questions 11–24)11. Cash Flows Ritter Corporation’s accountants prepared the following financial statements foryear-end 2010:1. Explain the change in cash during 2010.2. Determine the change in net working capital in 2010.3. Determine the cash flow generated by the firm’s assets during 2010.12. Financial Cash Flows The Stancil Corporation provided the following current information:Determine the cash flows from the firm and the cash flows to investors of the firm.13. Building an Income Statement During the year, the Senbet Discount Tire Company hadgross sales of $1.2 million. The firm’s cost of goods sold and selling expenses were $450,000 and $225,000, respectively. Senbet also had notes payable of $900,000. These notes carried an interest rate of 9 percent. Depreciation was $110,000. Senbet’s tax rate was 35 percent.1. What was Senbet’s net income?2. What was Senbet’s operating cash flow?14. Calculating Total Cash Flows Schwert Corp. shows the following information on its 2010income statement: sales = $167,000; costs = $91,000; other expenses = $5,400; depreciation expense = $8,000; interest expense = $11,000; taxes = $18,060; dividends = $9,500. In addition, you’re told that the firm issued $7,250 in new equity during 2010 and redeemed $7,100 in outstanding long-term debt.1. What is the 2010 operating cash flow?2. What is the 2010 cash flow to creditors?3. What is the 2010 cash flow to stockholders?4. If net fixed assets increased by $22,400 during the year, what was the addition to networking capital (NWC)?15. Using Income Statements Given the following information for O’Hara Marine Co., calculatethe depreciation expense: sales = $43,000; costs = $27,500; addition to retained earnings = $5,300; dividends paid = $1,530; interest expense = $1,900; tax rate = 35 percent.1. What is owners’ equity for 2009 and 2010?2. What is the change in net working capital for 2010?3. In 2010, Weston Enterprises purchased $1,800 in new fixed assets. How much in fixedassets did Weston Enterprises sell? What is the cash flow from assets for the year? (The tax rate is 35 percent.)4. During 2010, Weston Enterprises raised $360 in new long-term debt. How much long-termdebt must Weston Enterprises have paid off during the year? What is the cash flow to creditors?Use the following information for Ingersoll, Inc., for Problems 23 and 24 (assume the tax rate is34 percent):23. Financial Statements Draw up an income statement and balance sheet for this company for2009 and 2010.24. Calculating Cash Flow For 2010, calculate the cash flow from assets, cash flow to creditors,and cash flow to stockholders.CHALLENGE (Questions 25–27)25. Cash Flows You are researching Time Manufacturing and have found the following accountingstatement of cash flows for the most recent year. You also know that the company paid $82 million in current taxes and had an interest expense of $43 million. Use the accounting statement of cash flows to construct the financial statement of cash flows.Nick has also provided the following information: During the year the company raised $118,000 in new long-term debt and retired $98,000 in long-term debt. The company also sold $11,000 in new stock and repurchased $40,000 in stock. The company purchased $786,000 in fixed assets and sold $139,000 in fixed assets.Angus has asked you to prepare the financial statement of cash flows and the accounting statement of cash flows. He has also asked you to answer the following questions:1. How would you describe Warf Computers’ cash flows?2. Which cash flow statement more accurately describes the cash flows at the company?3. In light of your previous answers, comment on Nick’s expansion plans.。
Fundamentals of Corporate Finance
Fundamentals of Corporate FinanceChapter 1: Introduction to Corporate Finance (Summary)This chapter has introduced you to some of the basic ideas in corporate finance. In it, we saw that:1.corporate finance has three main areas of concerns:a.What long-term investments should the firm take? This is the capitalbudgeting decisionb.Where will the firm get the long-term financing to pay for itsinvestment? In other words, what mixture of debt and equity shouldwe use to fund our operations? This is the capital structure decisionc.How should the firm manage its everyday financial activities? This isthe working capital decision2. The goal of financial management in a for-profit business is to makedecisions that increase the value of the stock or, more generally,increase the market value of the equity3.The corporate form of organization is superior to other forms when itcomes to raising money and transferring ownership interest, but it has the disadvantage of double taxation4.There is the possibility of conflicts between shareholders andmanagement in a large corporation. We called these conflicts agency problems and discussed how they might be controlled and reduced5.The advantages of the corporate form are enhanced by the existenceof financial markets. Financial institutions function to promote theefficiency of financial markets. Financial markets function as primary and secondary markets for corporate securities and can be organizedas either dealer or auction markets. Globalization, deregulation, andfinancial engineering are important forces shaping financial marketsand the practice of financial managementOf the topics we have discussed thus far, the most important is the goal of financial management: maximizing the value of the stock. Throughout the text, as we analyze financial decisions, we always ask the same question: how does the decision under consideration affect the value of the shares?Chapter 2 Financial Statements, Taxes, and Cash Flow (Summary)This chapter has introduced you to some of the basics of financial statements, taxes, and cash flow. In it we saw that:1.The book values on an accounting balance sheet can be verydifferent from market values. The goal of financial managementis to maximize the market value of the stock, not its book value income as it is computed on the income statement is notcash flow. A primary reason is that depreciation, a non-cashexpense, is deducted when net income is computed3.Marginal and average tax rates can be different; the marginaltax rate is relevant for most financial decisions4.There is a cash flow identity much like the balance sheetidentity. It says that cash flow from assets equal cash flow tobondholders and shareholders. The calculation of cash flowfrom financial statements isn’t difficult. Care must be taken inhandling non-cash expenses, such as depreciation, and in notconfusing operating costs with financial costs. Most of all, it isimportant not to confuse book values with market values andaccounting income with cash flow.5.different types of Canadian investment income, dividends,interest, and capital gains are taxed differently6.Corporate income taxes create a tax advantage for debtfinancing (paying tax-deductible interest) over equity financing(paying dividends).7.Capital cost allowance (CCA) is depreciation for tax purposesin Canada. CCA calculations are important for determiningcash flows.。
大学财务会计专业英语教材
大学财务会计专业英语教材In recent years, the field of accounting has witnessed significant advancements and developments, necessitating comprehensive and up-to-date academic resources to meet the demands of students studying finance and accounting. With the increasing globalization of business and finance, proficiency in English is an essential skill for accounting professionals, particularly those specializing in financial accounting. Therefore, the creation of a specialized English textbook for university-level finance and accounting students is of great importance.Chapter 1: Introduction to Financial Accounting1.1 The Role and Importance of Financial Accounting1.2 Basic Concepts and Principles in Financial AccountingChapter 2: Preparation of Financial Statements2.1 The Accounting Equation2.2 Recording Transactions: The Double-Entry System2.3 The Chart of Accounts2.4 Journalizing and Posting Transactions2.5 Trial BalanceChapter 3: Income Statement and Statement of Financial Position3.1 Understanding Income Statement3.2 Income Statement Components3.3 Statement of Financial Position: Assets, Liabilities, and EquityChapter 4: Revenue Recognition and Measurement4.1 Revenue Recognition Principles4.2 Measurement of Revenue: Sales, Services, and Other IncomeChapter 5: Expense Recognition and Measurement5.1 Expense Recognition Principles5.2 Measurement of Expenses: Cost of Goods Sold, Operating Expenses, and OthersChapter 6: Cash Flow Statements6.1 Importance and Purpose of Cash Flow Statements6.2 Operating, Investing, and Financing Activities6.3 Preparing a Cash Flow StatementChapter 7: Analysis and Interpretation of Financial Statements7.1 Financial Ratios and Metrics7.2 Horizontal and Vertical Analysis7.3 Limitations and Adjustments in Financial StatementsChapter 8: International Financial Reporting Standards (IFRS)8.1 Overview of IFRS8.2 IFRS Framework and Key Concepts8.3 Differences between IFRS and Generally Accepted Accounting Principles (GAAP)Chapter 9: Corporate Financial Reporting9.1 Financial Reporting for Corporations9.2 Disclosure Requirements and Auditors’ Opinions9.3 Regulatory Framework for Corporate Financial ReportingChapter 10: Accounting for Business Combinations10.1 Mergers and Acquisitions10.2 Consolidation Methods and Procedures10.3 Accounting for Non-controlling InterestsChapter 11: Financial Statement Analysis and Valuation11.1 Valuation of Assets and Liabilities11.2 Valuation Techniques: Cost Approach, Market Approach, and Income Approach11.3 Interpreting Financial Statement Analysis for Investment and Decision MakingBy providing a systematic overview of the principles, concepts, and techniques in financial accounting, this specialized English textbook addresses the needs of university students studying finance and accounting. It equips them with the necessary knowledge and skills to understand and apply financial accounting practices in an international context. With itscomprehensive content and clear explanations, this textbook serves as an indispensable resource for students pursuing a career in finance and accounting.。
公司理财精要版原书第12版习题库答案Ross12e_Chapter02_TB
Fundamentals of Corporate Finance, 12e (Ross)Chapter 2 Financial Statements, Taxes, and Cash Flow1) Which one of the following is classified as a tangible fixed asset?A) Accounts receivableB) Production equipmentC) CashD) PatentE) Inventory2) Which one of the following is a current asset?A) Accounts payableB) TrademarkC) Accounts receivableD) Notes payableE) Equipment3) Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?A) Real estate investmentB) Good reputation of the companyC) Equipment owned by the firmD) Money due from a customerE) An item held by the firm for future sale4) Which one of the following is a current liability?A) Note payable to a supplier in 13 monthsB) Amount due from a customer in two weeksC) Account payable to a supplier that is due next weekD) Loan payable to the bank in 18 monthsE) Amount due from a customer that is past due5) Which one of the following will decrease the value of a firm's net working capital?A) Using cash to pay a supplierB) Depreciating an assetC) Collecting an accounts receivableD) Purchasing inventory on creditE) Selling inventory at a loss6) Which one of the following statements concerning net working capital is correct?A) Net working capital increases when inventory is purchased with cash.B) Net working capital excludes inventory.C) Total assets must increase if net working capital increases.D) Net working capital may be a negative value.E) Net working capital is the amount of cash a firm currently has available for spending.7) Which one of the following statements concerning net working capital is correct?A) A firm's ability to meet its current obligations increases as the firm's net working capital decreases.B) An increase in net working capital must also increase current assets.C) Net working capital increases when inventory is sold for cash at a profit.D) Firms with equal amounts of net working capital are also equally liquid.E) Net working capital is a part of the operating cash flow.8) Which one of the following accounts is the most liquid?A) InventoryB) BuildingC) Accounts ReceivableD) EquipmentE) Land9) Which one of the following represents the most liquid asset?A) $100 account receivable that is discounted and collected for $96 todayB) $100 of inventory that is sold today on credit for $103C) $100 of inventory that is discounted and sold for $97 cash todayD) $100 of inventory that is sold today for $100 cashE) $100 of accounts receivable that will be collected in full next week10) Which one of the following statements related to liquidity is correct?A) Liquid assets tend to earn a high rate of return.B) Liquid assets are valuable to a firm.C) Liquid assets are defined as assets that can be sold quickly regardless of the price obtained.D) Inventory is more liquid than accounts receivable because inventory is tangible.E) Any asset that can be sold is considered liquid.11) Shareholders' equity:A) is referred to as a firm's financial leverage.B) is equal to total assets plus total liabilities.C) decreases whenever new shares of stock are issued.D) includes patents, preferred stock, and common stock.E) represents the residual value of a firm.12) As the degree of financial leverage increases, the:A) probability a firm will encounter financial distress increases.B) amount of a firm's total debt decreases.C) less debt a firm has per dollar of total assets.D) number of outstanding shares of stock increases.E) accounts payable balance decreases.13) The book value of a firm is:A) equivalent to the firm's market value provided that the firm has some fixed assets.B) based on historical cost.C) generally greater than the market value when fixed assets are included.D) more of a financial than an accounting valuation.E) adjusted to the market value whenever the market value exceeds the stated book value.14) The value of which one of the following is included in the market value of a firm but is excluded from the firm's book value?A) Office equipmentB) CopyrightC) Distribution warehouseD) Employee's experienceE) Land acquired over 25 years ago15) You recently purchased a grocery store. At the time of the purchase, the store's market value and its book value were equal. The purchase included the building, fixtures, and inventory. Which one of the following is most apt to cause the market value of this store to be less than its book value?A) A sudden and unexpected increase in inflationB) The replacement of old inventory items with more desirable productsC) Improvements to the surrounding area by other store ownersD) Construction of a new restricted access highway located between the store and the surrounding residential areasE) Addition of a stop light at the main entrance to the store's parking lot16) Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?A) Income statementB) Creditor's statementC) Balance sheetD) Statement of cash flowsE) Dividend statement17) Net working capital is defined as:A) total liabilities minus shareholders' equity.B) current liabilities minus shareholders' equity.C) fixed assets minus long-term liabilities.D) total assets minus total liabilities.E) current assets minus current liabilities.18) Which one of these sets forth the common set of standards and procedures by which audited financial statements are prepared?A) Matching principleB) Cash flow identityC) Generally Accepted Accounting PrinciplesD) Financial Accounting Reporting PrinciplesE) Standard Accounting Value Guidelines19) Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?A) Income statementB) Balance sheetC) Statement of cash flowsD) Tax reconciliation statementE) Market value report20) Noncash items refer to:A) fixed expenses.B) inventory items purchased using credit.C) the ownership of intangible assets such as patents.D) expenses that do not directly affect cash flows.E) sales that are made using store credit.21) Which one of the following is true according to generally accepted accounting principles?A) Depreciation is recorded based on the market value principle.B) Income is recorded based on the realization principle.C) Costs are recorded based on the realization principle.D) Depreciation is recorded based on the recognition principle.E) Costs of goods sold are recorded based on the recognition principle.22) Which one of these is most apt to be a fixed cost?A) Raw materialsB) Manufacturing wagesC) Management bonusesD) Office salariesE) Shipping and freight23) Which one of the following statements is correct assuming accrual accounting is used?A) The addition to retained earnings is equal to net income plus dividends paid.B) Credit sales are recorded on the income statement when the cash from the sale is collected.C) The labor costs for producing a product are expensed when the product is sold.D) Interest is a non-cash expense.E) Depreciation increases the marginal tax rate.24) The percentage of the next dollar you earn that must be paid in taxes is referred to as the________ tax rate.A) meanB) residualC) totalD) averageE) marginal25) The ________ tax rate is equal to total taxes divided by total taxable income.A) deductibleB) residualC) totalD) averageE) marginal26) Which one of the following statements related to corporate taxes is correct?A) A company's marginal tax rate must be equal to or lower than its average tax rate.B) The tax for a company is computed by multiplying the marginal tax rate times the taxable income.C) Additional income is taxed at a firm's average tax rate.D) The marginal tax rate will always exceed a company's average tax rate.E) The marginal tax rate for a company can be either higher than or equal to the average tax rate.27) Which one of the following statements concerning corporate income taxes is correct for 2018?A) All corporations are exempt from federal taxation.B) Corporations pay no tax on their first $50,000 of income.C) The federal income tax on corporations is a flat-rate tax with the same rate applying to all levels of taxable income.D) The marginal tax rate will always be lower than the average tax rate.E) The first 25 percent of corporate income is exempt from taxation.28) The cash flow that is available for distribution to a corporation's creditors and stockholders is called the:A) operating cash flow.B) net capital spending.C) net working capital.D) cash flow from assets.E) cash flow to stockholders.29) Which term relates to the cash flow that results from a company's ongoing, normal business activities?A) Operating cash flowB) Capital spendingC) Net working capitalD) Cash flow from assetsE) Cash flow to creditors30) Cash flow from assets is also known as the firm's:A) capital structure.B) equity structure.C) hidden cash flow.D) free cash flow.E) historical cash flow.31) The cash flow related to interest payments less any net new borrowing is called the:A) operating cash flow.B) capital spending cash flow.C) net working capital.D) cash flow from assets.E) cash flow to creditors.32) Cash flow to stockholders is defined as:A) the total amount of interest and dividends paid during the past year.B) the change in total equity over the past year.C) cash flow from assets plus the cash flow to creditors.D) operating cash flow minus the cash flow to creditors.E) dividend payments less net new equity raised.33) Which one of the following is an expense for accounting purposes but is not an operating cash flow for financial purposes?A) Interest expenseB) TaxesC) Cost of goods soldD) Labor costsE) Administrative expenses34) Depreciation for a tax-paying firm:A) increases expenses and lowers taxes.B) increases the net fixed assets as shown on the balance sheet.C) reduces both the net fixed assets and the costs of a firm.D) is a noncash expense that increases the net income.E) decreases net fixed assets, net income, and operating cash flows.35) Which one of the following statements related to an income statement is correct?A) Interest expense increases the amount of tax due.B) Depreciation does not affect taxes since it is a non-cash expense.C) Net income is distributed to dividends and paid-in surplus.D) Taxes reduce both net income and operating cash flow.E) Interest expense is included in operating cash flow.36) Which one of the following statements is correct concerning a corporation with taxable income of $125,000?A) Taxable income minus dividends paid will equal the ending retained earnings for the year.B) An increase in depreciation will increase the operating cash flow.C) Net income divided by the number of shares outstanding will equal the dividends per share.D) Interest paid will be included in both net income and operating cash flow.E) An increase in the tax rate will increase both net income and operating cash flow.37) Which one of the following will increase the cash flow from assets, all else equal?A) Decrease in cash flow to stockholdersB) Decrease in operating cash flowC) Decrease in the change in net working capitalD) Decrease in cash flow to creditorsE) Increase in net capital spending38) For a tax-paying firm, an increase in ________ will cause the cash flow from assets to increase.A) depreciationB) net capital spendingC) the change in net working capitalD) taxesE) production costs39) Which one of the following must be true if a firm had a negative cash flow from assets?A) The firm borrowed money.B) The firm acquired new fixed assets.C) The firm had a net loss for the period.D) The firm utilized outside funding.E) Newly issued shares of stock were sold.40) An increase in the interest expense for a firm with a taxable income of $123,000 will:A) increase net income.B) increase gross income.C) increase the cash flow from assets.D) decrease the cash flow from equity.E) decrease the operating cash flow.41) Which one of the following is excluded from the cash flow from assets?A) Accounts payableB) InventoryC) SalesD) Interest expenseE) Cost of goods sold42) Net capital spending:A) is equal to ending net fixed assets minus beginning net fixed assets.B) is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.C) reflects the net changes in total assets over a stated period of time.D) is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital.E) is equal to the net change in the current accounts.43) Which one of the following statements related to the cash flow to creditors must be correct?A) If the cash flow to creditors is positive, then the firm must have borrowed more money than it repaid.B) If the cash flow to creditors is negative, then the firm must have a negative cash flow from assets.C) A positive cash flow to creditors represents a net cash outflow from the firm.D) A positive cash flow to creditors means that a firm has increased its long-term debt.E) If the cash flow to creditors is zero, then a firm has no long-term debt.44) A positive cash flow to stockholders indicates which one of the following with certainty?A) The dividends paid exceeded the net new equity raised.B) The amount of the sale of common stock exceeded the amount of dividends paid.C) No dividends were distributed, but new shares of stock were sold.D) Both the cash flow to assets and the cash flow to creditors must be negative.E) Both the cash flow to assets and the cash flow to creditors must be positive.45) A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. What is the amount of the net working capital?A) $970B) $720C) $640D) $3,110E) $2,86046) A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities?A) $2,050B) $2,920C) $4,130D) $7,950E) $6,89047) A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400,current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?A) $6,900B) $15,300C) $18,700D) $23,700E) $35,50048) Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?A) −$100B) $300C) $600D) $1,700E) $1,80049) Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000 of which 40 percent is payable within the next year. The firm has net fixed assets of $209,800. What is the amount of the net working capital?A) $149,900B) $93,500C) $125,600D) −$47,500E) $56,50050) Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This equipment is currently valued at $97,400 on today's balance sheet but could actually be sold for $92,900. This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800. What is the book value of shareholders' equity?A) $31,400B) $47,700C) $35,900D) $249,400E) $253,90051) The What-Not Shop owns the building in which it is located. This building initially cost $647,000 and is currently appraised at $819,000. The fixtures originally cost $148,000 and are currently valued at $65,000. The inventory has a book value of $319,000 and a market value equal to 1.1 times the book value. The shop expects to collect 96 percent of the $21,700 in accounts receivable. The shop has $26,800 in cash and total debt of $414,700. What is the market value of the shop's equity?A) $867,832B) $900,166C) $695,832D) $775,632E) $1,190,33252) The Widget Co. purchased all of its fixed assets three years ago for $4 million. These assets can be sold today for $2 million. The current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the total assets today is ________ and the market value of those assets is ________.A) $4,600,000; $3,900,000B) $4,600,000; $3,125,000C) $5,000,000; $3,125,000D) $5,000,000; $3,900,000E) $6,500,000; $3,900,00053) JJ Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of $1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital?A) $44,600B) $15,700C) $12,600D) $15,800E) $9,30054) The River Side Stop has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity?A) −$4,900B) −$5,200C) $0D) $4,900E) $5,20055) Jensen Enterprises paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year?A) $180B) $520C) $1,020D) $880E) $1,20056) Andre's Bakery has sales of $487,000 with costs of $263,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 21 percent. What is the net income?A) $142,750B) $123,240C) $109,000D) $128,700E) $134,55057) Hayes Bakery has sales of $30,600, costs of $15,350, an addition to retained earnings of $4,221, dividends paid of $469, interest expense of $1,300, and a tax rate of 21 percent. What is the amount of the depreciation expense?A) $4,820.13B) $5,500.89C) $8,013.29D) $8,180.01E) $9,500.0058) Last year, Kaylor Equipment had $15,900 of sales, $500 of net new equity, dividend payments of $75, an addition to retained earnings of $418, depreciation of $680, and $511 of interest expense. What are the earnings before interest and taxes at a tax rate of 21 percent?A) $589.46B) $1,135.05C) $1,331.54D) $1,560.85E) $949.4659) Galaxy Interiors income statement shows depreciation of $1,611, sales of $21,415, interest paid of $1,282, net income of $1,374, and costs of goods sold of $16,408. What is the amount of the noncash expenses?A) $2,893B) $1,282C) $740D) $1,611E) $2,35160) Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 21 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?A) $98,210B) $81,700C) $95,200D) $103,460E) $121,68061) Keisler's has cost of goods sold of $11,518, interest expense of $315, dividends of $420, depreciation of $811, and a change in retained earnings of $296. What is the taxable income given a tax rate of 21 percent?A) $955.38B) $967.78C) $906.33D) $776.41E) $646.1562) What is the average tax rate for a firm with taxable income of $118,740 in 2017?Taxable Income Tax Rate$ 0 - 50,000 15 %50,001 - 75,000 2575,001 - 100,000 34100,001 - 335,000 39A) 26.68 percentB) 34.87 percentC) 24.89 percentD) 36.67 percentE) 39.00 percent63) For 2017, Nevada Mining had projected taxable income of $94,800. Its actual taxable income exceeded this projection by $21,000. How much additional tax did the firm owe due to the $21,000 increase in taxable income?Taxable Income Tax Rate$ 0 - 50,000 15 %50,001 - 75,000 2575,001 - 100,000 34100,001 - 335,000 39A) $7,930B) $8,036C) $8,150D) $7,682E) $8,19764) In 2017, Boyer Enterprises had $76,700 in taxable income. What was the firm's average tax rate for the year?Taxable Income Tax Rate$ 0 - 50,000 15 %50,001 - 75,000 2575,001 - 100,000 34100,001 - 335,000 39A) 28.25 percentB) 18.68 percentC) 26.48 percentD) 20.14 percentE) 29.03 percent65) Winston Industries had sales of $843,800 and costs of $609,900. The company paid $38,200 in interest and $35,000 in dividends. The depreciation was $76,400. The firm has a combined tax rate of 24 percent. What was the addition to retained earnings for the year?A) $55,668B) $57,240C) $61,060D) $56,200E) $68,40066) RTF Oil has total sales of $911,400 and costs of $787,300. Depreciation is $52,600 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cash flow?A) $108,410B) $108,320C) $109,924D) $106,417E) $109,08567) Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?A) $33,763B) $40,706C) $58,218D) $65,161E) $67,40868) At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?A) −$19,679B) −$11,503C) $19,387D) $15,497E) $21,90369) At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?A) $1,731B) −$1,001C) $11,129D) $13,861E) $19,17270) Ernie's Home Repair had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors?A) −$11,685B) −$11,272C) $17,301D) $17,418E) $11,17471) The Daily News has projected annual net income of $272,600, of which 28 percent will be distributed as dividends. Assume the company will have net sales of $75,000 worth of common stock. What will be the cash flow to stockholders if the tax rate is 21 percent?A) −$75,000B) $1,328C) $24,623.52D) $76,328E) $151,32872) The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What was the amount of the cash flow to stockholders?A) $5,100B) $7,830C) $18,020D) $19,998E) $20,68073) For the past year, Galaxy Interiors had depreciation of $2,419, beginning total assets of $23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was the amount of net capital spending for the year?A) −$382B) $2,037C) $2,801D) $1,993E) $1,17274) Carlisle Express paid $1,282 in interest and $975 in dividends last year. Current assets increased by $2,700, current liabilities decreased by $420, and long-term debt increased by $2,200. What was the cash flow to creditors?A) −$530B) −$918C) $1,839D) 2,132E) $3,09475) CBC Industries has sales of $21,415, interest paid of $1,282, costs of $9,740, and depreciation of $1,480. What is the operating cash flow if the tax rate is 22 percent?A) $10,114.14B) $9,900.86C) $8,985.86D) $8,536.67E) $9,714.1476) Williamsburg Markets has an operating cash flow of $4,267 and depreciation of $1,611. Current assets decreased by $1,356 while current liabilities decreased by $2,662, and net fixed assets decreased by $382 during the year. What is free cash flow for the year?A) $1,732B) $2,247C) $2,961D) $3,915E) $4,26777) Up Towne Cleaners has taxable income of $48,900 and a tax rate of 21 percent. What is the change in retained earnings if the firm pays $20,200 in dividends for the year?A) $18,942B) $19,948C) $19,374D) $18,431E) $18,57478) For the year, B&K United increased current liabilities by $1,400, decreased cash by $1,200, increased net fixed assets by $340, increased accounts receivable by $200, and decreased inventory by $150. What is the annual change in net working capital?A) −$2,550B) −$70C) $590D) $550E) −$2,21079) TJH, Inc. purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600?A) $115,200B) $76,600C) $94,200D) $38,000E) −$38,00080) Nu Furniture has sales of $241,000, depreciation of $32,200, interest expense of $35,700, costs of $103,400, and taxes of $14,637. What is the operating cash flow for the year?A) $108,229B) $121,367C) $122,963D) $117,766E) $128,03781) HiWay Furniture has sales of $316,000, depreciation of $47,200, interest expense of $41,400, costs of $148,200, and taxes of $16,632. The firm has net capital spending of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year?A) $145,985B) $129,068C) $119,655D) $120,810E) $134,58582) At the beginning of the year, Trees Galore had current liabilities of $15,932 and total debt of $68,847. By year end, current liabilities were $13,870 and total debt was $72,415. What is the amount of net new borrowing for the year?A) $5,630B) −$2,480C) $3,568D) $4,677E) −$2,06283) JJ Enterprises has current assets of $10,406, long-term debt of $4,780, and current liabilities of $9,822 at the beginning of the year. At year end, current assets are $11,318, long-term debt is $5,010, and current liabilities are $9,741. The firm paid $277 in interest and $320 in dividends during the year. What is the cash flow to creditors for the year?A) −$47B) −$507C) −$97D) $47E) $50784) BK Enterprises neither sold nor repurchased any shares of stock during the year. The firm had annual sales of $7,202, depreciation of $1,196, cost of goods sold of $4,509, interest expense of $318, taxes of $248, beginning-of-year shareholders' equity of $4,808, and end-of-year shareholders' equity of $4,922. What is the amount of dividends paid during the year?A) $817B) $1,009C) $864D) $709E) $51585) Carlisle Carpets has cost of goods sold of $92,511, interest expense of $4,608, dividends paid of $3,200, depreciation of $14,568, an increase in retained earnings of $11,920, and a tax rate of 21 percent. What is the operating cash flow?A) $34,296.00B) $42,122.42C) $36,462.58D) $31,543.10E) $36,741.42。
Lecture 2 Financial Statement
7
The Income Statement
Revenues Increase in a company’s resources from the sale of goods or services. Expenses Costs incurred in the normal course of business to generate revenues. Net Income or (Net Loss) Revenues - Expenses
Owners’ Equity
Paid-in Capital Retained earnings Total liabilities and owners’ equity
Must Equal
Classified and Comparative Balance Sheets
• Classified balance sheet
Owners and managers want the most favorable results possible. • Bank credit • Bonuses • Public stock price CPA firms have economic incentives to perform credible audits. • Reputation • Lawsuits 15
13
External Audits
Audit Report
– Issued by an independent CPA firm. – Verifies financial statements have been prepared according to GAAP.
金融英语 chapter 2
B. Factors Evaluated by the Chartering Authorities
In evaluating a charter application, the chartering authority generally considers four factors: ●the bank’s prospects for future earnings; ●the qualifications of the bank’s proposed management; ●the adequacy of the bank’s capital structure; and ●the convenience and needs of the community. In addition, Regulators hopes to get the following items: (1) an operating plan; (2) personal and financial information on the proposed management for background investigations; (3) pro forma financial statements and projections for the proposed bank; and (4)information on the demand for banking products and 5 services and existing competition in the target market
6
3.
Arrangements for Ongoing Banking Supervision
A. Risks in Banking
财务管理专业英语 -Financial Statements
furniture; fixtures and fittings (items such as the shelves and counters in a shop).
2. Intangible Assets Intangible asset.mp3
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Asset: Non-Current asset
Non-Current Assets
These have ‘lives’ longer than current assets. They are assets of a more permanent nature.
Non-Current Assets are further divided (classified) into three groups:
Debt vs. equity
The basic feature of a debt is that it is a promise by the borrowing firm to repay a fixed dollar amount of by a certain date.
The shareholder’s claim on firm value is the residual amount that remains after the debtholders are paid.
3. Long-term Investment: These assets come from the
additional cash funds that the business invests in income-earning securities.
chap002 Financial Reporting and Analysis(财务报表分析-台湾中兴大学)
Environmental Factors
International Accounting Standards (IAS)
Set by International Accounting Standards Board Not currently accepted in U.S. SEC under pressure to accept IAS
Politicians
Others
Accountants
Provide input to
Financial Accounting Standards Board
Help set
Generally Accepted Accounting Principles
Environmental Factors
IAS
Environmental Factors
Corporate Governance
Board of directors oversightAccounting Set by International Audit committeeBoard Standards of the board - oversee accounting process Not currently accepted in U.S. - oversee internal control - oversea internal/external audit SEC Auditor pressure to accept under Internal
Environmental Factors
Economic, Industry & Company News
Impacts current & future financial condition and performance
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Statement of Cash Flows
• Financial Transactions of Firms: 1. Sources of Funds: Cash inflows that increase cash balance 2. Uses of Funds: Cash outflows that decrease cash balance
Gross Profit = Sales - Cost of Goods Sold
Income Statement
4. Selling, G&A Expenses: Selling, General and Administrative Expenses. Marketing, paperwork, etc... 5. Fixed Expenses 6. Depreciation Expense: Depreciation of machinery 7. EBIT: Earnings Before Interest and Taxes. This is also called as operating income. This is the income generated from the operations of firm and excludes taxes and interest expenses
Statement of Cash Flows
1. Cash Flows from Operations: Typically these are: Net income, depreciation, changes in -accounts receivable -inventories -accounts payable -notes payable -other current liabilities
Balance Sheet
• Liabilities: - Debts of the firm - Entered below Assets, or on the right of the balance sheet • Equity: - Difference between what firm owns and what it owes to others - Entered below liabilities in the balance sheet
Statement of Cash Flows
• Most of the items in statement of cash flows come from change in balance sheet items • Therefore, we need balance sheets of two years • We also need income statement • Operational Cash Flow (Net Income + Depreciation) comes from Income Statement
Income Statement
• The order of the items that should be entered in the income statement is as follows: 1. Sales: Total $ income incurred by sales (revenue) 2. Cost of Goods Sold: This item includes raw material, labor, etc... 3. Gross Profit: Profit from goods sold, not including any expense other than cost of goods
EBIT = Gross Profit - (Selling, G&A Expenses + Fixed Expenses + Depreciation Expense)
Income Statement
8. Interest Expense: Interest paid on the firm’s debt 9. Earnings Before Taxes: This item shows the income generated without including taxes
• Statement of Cash Flows: -Summarizes changes in firm’s cash balance
Ending Cash Balance = Beginning Cash Balance + Cash Inflow (Sources) Cash outflow (Uses)
Statement of Cash Flows
• Statement of Cash Flows separates firm activities into three parts: 1. Operating Activities 2. Investing Activities 3. Financing Activities
Statement of Cash Flows
• How Well Managers Perform? - Analyze how management uses shareholders’ money: -Use Statement of Cash Flows
Statement of Cash Flows
Current Liabilities + Long-term Liabilities
Balance Sheet
C. SHAREHOLDER’S EQUITY (Below Liabilities) 1. Preferred Stock: 2. Common Stock: 3. Retained Earnings: 4. Total Shareholder’s Equity:
CHAPTER 2
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
• • • • • Income Statement Common Size Income Statement Balance Sheet Common Size Balance Sheet Statement of Cash Flows
Income Statement
• Summarizes the results of the firm’s operations over a period of time • Shows total revenues and expenses for the time period • Shows different measures of profit • Prepared for different time periods: Monthly, quarterly, and annually
• NOTE: Again remember that
Total Assets = Total Liabilities and Equity
Common-size Balance Sheet
• Preparing common-size balance sheet is similar to the one we did for income statement. • Instead of Sales, for Balance Sheet, we use Total Assets to form the percentages, and • Explain all data as a percentage of Total Assets, i.e. Format cells as %, 0.00%
11. Net Income:
Net Income = Earnings Before Taxes - Taxes
• Common-size income statements display data not as $ amounts but as percentages of firm’s total revenues (Sales) • Benefits: - Easy comparison between firms of different sizes - Show important trends which may not be seen in $ amounts
Preferred Stock + Common Stock + Retained Earnings
Balance Sheet
D. TOTAL LIABILITIES AND EQUITY (below Total Shareholder’s Equity)
Total Liabilities + Total Shareholder’s Equity
Earnings Before Taxes = EBIT - Interest Expense
10. Taxes: Assume 40% tax rate. Enter as follows: Taxes @ 40%, or Taxes (40%)
Taxes = 0.4*Earnings Before Taxes
Net Fixed Assets=Fixed Assets - Accumulated Depreciation
Balance Sheet
B. LIABILITIES (Below Assets or on the right of Balance Sheet) 1. Current Liabilities: • Short term liabilities • Typically, current liabilities are: -Accounts payable -Notes payable -Accruals 2. Long-term Liabilities: Bonds, bank loans, etc.. 3. Total Liabilities: