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    Department: Banking & Finance Course Title: Business Finance Chapter 3: Financial Statements

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    Mhmd
    This chapter covers balance sheets, income statements, cash flow statements, and free cash flow. It includes examples of each statement for a company in 2019 and 2018. The balance sheet shows assets, liabilities, and equity. The income statement shows revenues, expenses, taxes, and net income. The cash flow statement shows cash flows from operating, investing, and financing activities. Free cash flow represents cash available for creditors and investors after necessary investments.

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    Department: Banking & Finance Course Title: Business Finance Chapter 3: Financial Statements

    Uploaded by

    Mhmd
    59 views14 pages
    This chapter covers balance sheets, income statements, cash flow statements, and free cash flow. It includes examples of each statement for a company in 2019 and 2018. The balance sheet shows assets, liabilities, and equity. The income statement shows revenues, expenses, taxes, and net income. The cash flow statement shows cash flows from operating, investing, and financing activities. Free cash flow represents cash available for creditors and investors after necessary investments.

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    BFIN300 _Chapter 3_Financial Statements.pptx

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    This chapter covers balance sheets, income statements, cash flow statements, and free cash flow. It includes examples of each statement for a company in 2019 and 2018. The balance sheet shows assets, liabilities, and equity. The income statement shows revenues, expenses, taxes, and net income. The cash flow statement shows cash flows from operating, investing, and financing activities. Free cash flow represents cash available for creditors and investors after necessary investments.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    59 views14 pages

    Department: Banking & Finance Course Title: Business Finance Chapter 3: Financial Statements

    Uploaded by

    Mhmd
    This chapter covers balance sheets, income statements, cash flow statements, and free cash flow. It includes examples of each statement for a company in 2019 and 2018. The balance sheet shows assets, liabilities, and equity. The income statement shows revenues, expenses, taxes, and net income. The cash flow statement shows cash flows from operating, investing, and financing activities. Free cash flow represents cash available for creditors and investors after necessary investments.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 14

    Department: Banking & Finance

    Course Title: Business Finance

    Chapter 3: Financial Statements,


    Cash Flows, and Taxes
    Chapter 3: Financial Statements,
    Cash Flows, and Taxes

    Topics Covered in this presentation:

     Balance Sheet
     Income Statements
     Cash Flows Statement
     Free Cash Flow
    Balance sheet

    Assets = Liabilities + Equity

    Resources owned Obligations Shareholders’


    and managed by payables to other stake in the
    the company entities company
    Balance sheet
    Assets
    Accounts 2019 2018

    Cash $10 $80


    Accounts Receivables 375 315
    Inventories Receivables 615 415
    Current Assets 1,000 810
    Net Property, Plant & Equipment 1,000 870
    Total Assets $2,000 $1,680
    Balance sheet
    Liabilities and Equity
    Accounts 2019 2018

    Accounts payables & accruals $200 $160


    Notes Payables 110 60
    Current Liabilities Receivables 310 220
    Long term bonds (liabilities) 750 580
    Total Liabilities $1,060 $800
    Common stock 130 130
    Retained Earnings 810 750
    Total Equity $940 $880
    Total Liabilities and Equity $2,000 $1,680
    Income Statements
    Income Statements
    Accounts 2019

    Sales $3,000
    Operating costs (2,616.2)
    EBITDA (Earnings before interest, tax, depreciation and amortization) 383.8
    Depreciation and amortization (100)
    EBIT 283.8
    Interest (88)
    EBT 195.8
    Tax (40%)  EBT * Tax rate = 195.8 * 0.4 = 78.3 (78.3)
    Net Income $117.5
    Stockholders’
    Equity Statement
    Net Income = $ 117.5

    Addition to retained
    Dividends = $ 57.5
    earnings = $ 60

    Net Income = Dividends + Addition to retained earnings

    Addition to RE = RE 2019 – RE 2018


    Cash Flows
    Statement
    Cash flows from operating activities
    Net income – Depreciation – A/R – Inventories – A/P – Accruals

    Cash flows from investing activities


    Property, Plant & Equipment

    Cash flows from financing activities


    Notes payables – Bonds – Common stocks - Dividends

    Net Cash Flows during the year


    Cash Flows
    Statement
    Cash Flow Statements (2019)
    1. Cash flow from operating activities
    Net Income $ 117.5
    Depreciation and amortization +100
    Increase in inventories (200)
    Increase in accounts receivable (60)
    Increase in A/P and accruals 40
    Net cash flow from operating activities $ (2.5)

    Assets Liabilities & Equity


    Increase Cash Cash
    Decrease Cash Cash
    Cash Flows
    Statement
    Cash Flow Statements (2019)
    2. Cash flow from investing activities
    Increase in Property, plant & equipment $ (230)
    Net cash flow from investing activities $ (230)

    = (Net PPE 2019 – Net PPE 2018) + Depreciation 2019


    = (1,000 – 870) + 100 = $ 230
    Cash Flows
    Statement
    Cash Flow Statements (2019)
    3. Cash flow from financing activities
    Increase in notes payable $ 50
    Increase in bonds $ 170
    Dividends paid $ (57.5)
    Net cash flow from financing activities $ 162.5

    = Net income 2019 – (RE2019 – RE2018)= 117.5 – 60 = $57.5


    Cash Flows
    Statement
    Cash Flow Statements (2019)
    4. Summary
    Net change in cash flows during the year $ (70)
    Beginning cash balance $ 80
    Ending cash balance = -70 + 80 = 10 $ 10

    It must be equal to cash account


    on the balance sheet of 2019

    = CF operating + CF investing + CF financing


    = -2.5 -230 +162.5 = $ -70
    Free Cash Flow
    (FCF)
    FCF represents the cash available to creditors and investors
    in a company, after conducting the necessary investments

    FCF = NOPAT + Dep. – (Capital exp. + Change in NWC)

    Net Depreciation Capital Change in Net


    operating expense expenditures: working
    profit after during the Investment in capital over
    tax year P,P&E the year
    Free Cash Flow
    (FCF)
    FCF = NOPAT + Dep. – (Capital exp. + Change in NWC)

    NOPAT = EBIT*(I-T)

    Capital exp. = (Net PPE 2019 – Net PPE 2018) + Depreciation 2019

    Change in NWC = NWC 2019 – NWC 2018

    NWC 2019 = Currents assets 2019 – A/P 2019 – Accruals 2019

    NWC 2018 = Currents assets 2018 – A/P 2018 – Accruals 2018

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