Scribd
Upload
4 views15 pages

CF - Review FM Part 1

Uploaded by

Mai Phạm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
4 views15 pages

CF - Review FM Part 1

Uploaded by

Mai Phạm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 15

Financial Statements and

Cash Flow from Assets


Review Part 1

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
2-2

Outline

• The Balance Sheet (B/S)

• The Income Statement (I/S)

• Cash Flow from Assets


2-3

Balance Sheet
The most important relationship in accounting
is the formula of the “Balance Sheet Identity”:

Total Assets = Total Liabilities +


Stockholders’ Equity
The Balance Sheet
Figure 2.1
2-5

U.S. Corporation Balance Sheet (B/S)


– Table 2.1

Place Table 2.1 (US Corp Balance Sheet) here


2-6

Net Working Capital (NWC)

NWC = Current Assets – Current


Liabilities

Positive when the cash that will be received over


the next 12 months exceeds the cash that will
be paid out

Usually positive in a financially healthy firm


2-7

Book Value vs. Market Value

The balance sheet provides the book


value of the assets, liabilities, and equity

Market value is the price at which the


assets, liabilities, or equity can actually be
bought or sold
2-8

U.S. Corporation Income Statement (I/S)


– Table 2.2
2-9

The Concept of Cash Flow


• The “Statement of Cash Flows” is one of three
components in the financial statements of a company

• In this chapter, we will look at how cash flow is generated


from utilizing assets and how it is paid to those that
finance the purchase of the assets

• A financial manager can derive this cash flow from the B/S
(slide 5) and the I/S (slide 8)
2-10

Cash Flow Calculation - Table 2.6


2-11

Cash Flow Calculation

• Where:
Net new borrowing = Ending Long-term debt –
Beginning Long-term debt

Net new equity raised = Ending Common stock


and paid-in surplus – Beginning Common stock
and paid-in surplus
2-12

Cash Flow From Assets

• Cash Flow From Assets = Operating Cash Flow –


Net Capital Spending – Changes in NWC

CFFA = OCF – NCS – ∆NWC


2-13

Example of CFFA: Part II


(see Slides 5 and 8 for B/S and I/S)
OCF = EBIT + Depreciation – Taxes = $547

NCS = Ending net fixed assets – Beginning net


fixed assets + Depreciation = $130
Changes in NWC = Ending NWC – Beginning
NWC = $330
CFFA = OCF – NCS - ∆NWC
= 547 – 130 – 330 = $87
2-14

Cash Flow From Assets

• Cash Flow From Assets (CFFA) = Cash Flow


to Creditors + Cash Flow to Stockholders
2-15

Example of CFFA: Parts I, III, and IV


(see Slides 5 and 8 for B/S and I/S)

• CF to Creditors = Interest paid – Net new


borrowing = 70 – 46 = $24

• CF to Stockholders = Dividends paid – Net new


equity raised = 103 – 40 = $63

• CFFA = CF to creditors + CF to
Stockholders
= 24 + 63 = $87

You might also like