Financial Statement And Cash Flow Analysis

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Financial Statement and Cash Flow Analysis

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

What Companies Do
Financial Signs of an Improving Economy
• One indicator of a recovering economy is a decrease in the time it takes customers to pay their bills.
• A study conducted by REL, a consulting firm, and CFO Magazine found a 5.1 day decrease in DSO from 2007 to 2008.
Source: “Working It Out: The 2010 Working Capital Scorecard,” by David M. Katz, CFO Magazine, June 1, 2010, CFO.com, www.cfo.com/article.cfm/14499542 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Financial Statements
Accrualbased
approach
Cash flow approach • Revenues are recorded at the point of sale and costs when they are incurred, not necessarily when a firm receives or pays out cash.
• Used by financial professionals to focus attention on current and prospective inflows and outflows of cash. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Financial Statements
Balance Sheet

Income Statement

Financial
Statemen
ts

Statement of
Retained Earnings
Statement of
Cash Flows
Notes to
Financial Statements

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Balance Sheet
• A firm’s balance sheet presents a
“snapshot” view of the company’s financial position at a specific point in time.

assets = liabilities + stockholders’ equity

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Balance Sheet for Global Petroleum
Corporation

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Income Statement
• Income is also called profit, earnings, or margin.

Income = revenue  expenses

Measures of
Income

•
•
•
•

Gross profit
Operating profit
Other income
Earnings before interest and taxes • Pretax income
• Net income / net profit after taxes © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Income Statement for Global Petroleum
Corporation

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Statement of Retained Earnings
• The statement of retained earnings reconciles • the net income earned during a given year, and any cash dividends paid,
• with the change in retained earnings between the start and end of that year.

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Statement of Retained Earnings for Global Petroleum Corporation

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

What Companies Do Globally
Assessing the Market Value of Global
Brands

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

What CFOs Do
CFO Survey Evidence

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part

Financial Statements
Statement
of Cash
Flows

Notes to
Financial
Statements

• Reconciles
• the firm’s operating, investment, and financing cash flows • with changes in its cash and marketable securities
• during the year.
• Explanatory notes
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