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MGT 497 Financial Statements. Prof. Rick Hayes, Ph.D., CPA. Balance Sheet. Assets:. Liabilities & Equity:. Statement of Cash Flows. Cash Receivables Inventory Fixed Assets Other Assets. Liabilities Equity. Income Statement. Revenues Expenses Net Income. - PowerPoint PPT Presentation
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MGT 497 Financial Statements
Prof. Rick Hayes, Ph.D., CPA
Balance SheetBalance Sheet
Assets:CashReceivablesInventoryFixed AssetsOther Assets
Liabilities & Equity:
Liabilities
Equity
Income StatementIncome Statement
Revenues Expenses Net Income
Statement of Cash Flows
Statement of Cash Flows
Balance SheetBalance Sheet
Assets:CashReceivablesInventoryFixed AssetsOther Assets
Liabilities & Equity:
Liabilities
Equity
Statement of Stock-holders’ Equity
Statement of Stock-holders’ Equity
Rockyfellow, Inc.Income Statement
For the Year Ended December 31, 2001
The heading.The heading.
The Income StatementThe Income Statement The Income StatementThe Income Statement
The Income StatementThe Income Statement The Income StatementThe Income Statement
Sales revenue $186,230Cost of goods sold 73,350Gross profit 112,880Operating expenses:
Wages $42,700Utilities 6,430Depreciation 9,650Insurance 3,420Supplies 8,390Advertising 7,120Patent 3,000
Total operating expenses 80,710
The Income StatementThe Income Statement The Income StatementThe Income Statement
Sales revenue $186,230Cost of goods sold 73,350Gross profit 112,880Total operating expenses 80,710Operating income 32,170Interest expense 10,300Pretax income 21,870Income tax expense 5,600Net income $ 16,270
The Income StatementThe Income Statement The Income StatementThe Income Statement
Sales revenue $186,230Cost of goods sold 73,350Gross profit 112,880Total operating expenses 80,710Operating income 32,170Interest expense 10,300Pretax income 21,870Income tax expense 5,600Net income $ 16,270Earnings per share of common stock $1.30
($16,270 12,500 shares)
The Income StatementThe Income Statement The Income StatementThe Income Statement
Earnings per Share (Net Income Shares of Stock) =
Net Income =
Rockyfellow, Inc.Balance Sheet
December 31, 2001
The Balance SheetThe Balance SheetThe Balance SheetThe Balance Sheet
The heading.The heading.
The Balance SheetThe Balance SheetThe Balance SheetThe Balance Sheet
Rockyfellow, Inc.Balance Sheet
December 31, 2001
2001 2000
AssetsCurrent assets:
Cash$ 15,600 $ 11,700Accounts receivable 22,430
13,850Merchandise inventory 43,500
44,450Supplies 12,670
9,920Prepaid insurance 8,290
5,950 Total current assets $102,490
$ 85,870
2001 2000Property, plant, and equipment:
Equipment $ 93,070$ 79,570
Building 275,000235,000
368,070314,570
Less: Accumulated depreciation 105,860 96,210
262,210218,360
Land 36,810 45,000Total property, plant, and equipment 299,020263,360
Other assets:Patents 32,000
35,000 Total assets $433,510$384,230
2001 2000LiabilitiesCurrent liabilities:
Accounts payable $ 24,790$ 22,630
Wages payable 4,1005,510
Interest payable 11,2509,920
Income taxes payable 2,4003,000
Notes payable, current portion 14,400 9,320Total current liabilities 56,94050,380
Long-term liabilities:Notes payable, long-term 177,600
171,150 Total liabilities 234,540
221,530
2001 2000Stockholders’ Equity
Contributed capital $125,000$100,000
Retained earnings 73,970 62,700Total stockholders’ equity 198,970162,700 Total liabilities and stockholders’ equity $433,510$384,230
The Statement of Stockholders’ EquityThe Statement of Stockholders’ EquityThe Statement of Stockholders’ EquityThe Statement of Stockholders’ Equity
Rockyfellow, Inc.Statement of Stockholders’ Equity
For the Year Ended December 31, 2001
Contributed RetainedCapital Earnings Total
Balance, December 31, 2000 $100,000 $62,700 $162,700
Common stock issued 25,00025,000 Net income 16,270 16,270 Dividends declared (5,000)(5,000)
Balance, December 31, 2001 $125,000 $73,970 $198,970
Contributed capitalContributed capital is the is the amount of direct investment by amount of direct investment by
owners in a corporation.owners in a corporation.
Contributed capitalContributed capital is the is the amount of direct investment by amount of direct investment by
owners in a corporation.owners in a corporation.
Retained earningsRetained earnings is the is the cumulative amount of net cumulative amount of net
income earned that has been income earned that has been reinvested in the corporation.reinvested in the corporation.
Retained earningsRetained earnings is the is the cumulative amount of net cumulative amount of net
income earned that has been income earned that has been reinvested in the corporation.reinvested in the corporation.
Dividends are not Dividends are not reported on the income reported on the income statement because they statement because they
are notare not expenses. expenses.
Dividends are not Dividends are not reported on the income reported on the income statement because they statement because they
are notare not expenses. expenses.
The Statement of Stockholders’ EquityThe Statement of Stockholders’ EquityThe Statement of Stockholders’ EquityThe Statement of Stockholders’ Equity
Income Statement
Net income
Income Statement
Net income
Statement of Stockholders’ Equity
Beginning stockholders’Equity
+ Net income- Dividends+ Stock issued- Stock repurchased
Ending stockholders’ equity
Statement of Stockholders’ Equity
Beginning stockholders’Equity
+ Net income- Dividends+ Stock issued- Stock repurchased
Ending stockholders’ equity
Balance Sheet
Stockholders’ equity
Balance Sheet
Stockholders’ equity
The “link”
This statement reports events that resulted
in cash inflows and
outflows for a fiscal period.
The Statement of Cash FlowsThe Statement of Cash FlowsThe Statement of Cash FlowsThe Statement of Cash Flows
The Statement of Cash FlowsThe Statement of Cash FlowsThe Statement of Cash FlowsThe Statement of Cash Flows
In other words, this statement explains the changes in a company’s cash balance during the fiscal period.
In other words, this statement explains the changes in a company’s cash balance during the fiscal period.
Operating ActivitiesOperating Activities
Operating activities involve the use of resources to design,
produce, distribute, and market goods and services.
Operating activities involve the use of resources to design,
produce, distribute, and market goods and services.
Cash Flow from Operating ActivitiesCash Flow from Operating Activities
Cash Received from Operating Activities
Cash Paid for Operating Activities-
Net Cash from (for) Operating Activities=
Direct FormatDirect Format Direct FormatDirect Format
Cash flow from operating activities:Receipts:
Collections from customers $177,550 Payments:
To suppliers of inventory $(70,240)To employees (44,110)For utilities (6,430)For insurance (5,760)For supplies (11,140)For interest (8,970)For advertising (7,120)For income taxes (6,200)
Total cash payments (159,170) Net cash flow from operating activities 17,680
Rockyfellow, Inc.Statement of Cash Flows
For the Year Ended December 31, 2001(Direct Method)
Investing ActivitiesInvesting Activities
Investing activities involve the selection and management of long-term resources that will be used to develop, produce, and sell goods and services.
Investing activities involve the selection and management of long-term resources that will be used to develop, produce, and sell goods and services.
How much financing does an organization need?
Where should an organization obtain its financing?
When should an organization obtain funding?
What effect will financing have on profitability and survival?
Financing DecisionsFinancing DecisionsFinancing DecisionsFinancing Decisions
Cash flow from investing activities:Purchase of plant assets $(53,500)Sale of plant assets 8,190 Net cash flow from investing activities $(45,310)
Cash flow for financing activities:Proceeds from issuing common stock $25,000 Proceeds from issuing long-term debt 32,000 Payment of long-term debt (20,470)Payment of dividends (5,000)
Net cash flow from financing activities 31,530 Net increase in cash 3,900 Cash balance, December 31, 2000 11,700 Cash balance, December 31, 2001 $ 15,600
Indirect FormatIndirect FormatIndirect FormatIndirect Format
The indirect format reconciles net income on an accrual basis with
cash flow from operating activities on a cash basis.
The indirect format reconciles net income on an accrual basis with
cash flow from operating activities on a cash basis.
Cash flow from operating activities:Net income $ 16,270 Adjusted for:
Depreciation and amortization 12,650 Increase in receivables (8,580)Decrease in merchandise 950 Increase in supplies (2,750)Increase in prepaid insurance (2,340)Increase in accounts payable 2,160 Decrease in wages payable (1,410)Increase in interest payable 1,330 Decrease in income tax payable (600)
Net cash from operating activities 17,680
Rockyfellow, Inc.Statement of Cash Flows
For the Year Ended December 31, 2001(Indirect Method)
2001 2000 Change$22,430 $13,850 $8,580
From Income
Statement
From Balance Sheet
Summary of Adjustments for Summary of Adjustments for the Indirect Formatthe Indirect Format
Summary of Adjustments for Summary of Adjustments for the Indirect Formatthe Indirect Format
Noncash expenses, such as depreciation and amortization, are added to net income in computing cash flow from operating activities.
Increases in current asset balances are subtracted from net income. Decreases in current asset balances are added to net income.
Increases in current liability balances are added to net income. Decreases in current liability balances are subtracted from net income.
The following adjustments are made to net income using the
indirect format in computing cash flow from operating activities.
The following adjustments are made to net income using the
indirect format in computing cash flow from operating activities.
Indirect FormatIndirect FormatIndirect FormatIndirect Format
Net income+ Depreciation and Amortization Expense- Increases in Current Asset Accounts+ Decreases in Current Asset Accounts+ Increases in Current Liability Accounts- Decreases in Current Liability Accounts= Cash Flow from Operating Activities
Cash flow from investing activities:Purchase of plant assets $(53,500)Sale of plant assets 8,190 Net cash flow from investing activities $(45,310)
Cash flow for financing activities:Proceeds from issuing common stock $25,000 Proceeds from issuing long-term debt 32,000 Payment of long-term debt (20,470)Payment of dividends (5,000)
Net cash flow from financing activities 31,530 Net increase in cash 3,900 Cash balance, December 31, 2000 11,700 Cash balance, December 31, 2001 $ 15,600
The investing and financing sections are
identical for the direct and indirect formats.
The investing and financing sections are
identical for the direct and indirect formats.
Interrelationships Among Interrelationships Among Financial StatementsFinancial Statements
Interrelationships Among Interrelationships Among Financial StatementsFinancial Statements
Amounts on the Balance Sheet
Beginning of Fiscal Period
Amounts on the Balance Sheet
Beginning of Fiscal Period
Changes Reported on the Income Statement and Statement of Cash Flows
Changes Reported on the Income Statement and Statement of Cash Flows
+-
Amount on the Balance Sheet
End of Fiscal Period
Amount on the Balance Sheet
End of Fiscal Period
=