FIN 300 Lecture Notes - Lecture 2: International Financial Reporting Standards, Operating Cash Flow, Cash Flow
28 views4 pages
1 Mar 2016
School
Department
Course
Professor
Document Summary
Chapter 2- financial statements, cash flow and taxes. Summarizes what the firm owns (assets) and what the firm owes (liabilities) Fixed asset-relatively long life, can be tangible such as a truck or computer, or intangibles such as trademark or patent (capital assets) Current liabilities-life less than a year, listed before long-term liabilities. Bond and bondholders generically referred to long-term debt and long-term creditors. Difference between the total value of assets and total value liability as shareholders equity, also called common equity or owners equity. Networking capital-is the difference between current assets and current liabilities. Equity holders are only entitled to the residual value, the portion that after creditors are paid. ( creditors get first claim to the firms cash) The use of debt in firms capital structure is called financial leverage, Financial leverage increases the potential reward to shareholders but it also increases the potential for financial distress and business failure.
Get access
Grade+
$40 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers
Related Documents
Related Questions
Given the financial statements for Jones Corporation and SmithCorporation:
JONES CORPORATION | |||||||
Current Assets | Liabilities | ||||||
Cash | $ | 22,000 | Accounts payable | $ | 127,000 | ||
Accounts receivable | 81,100 | Bonds payable (long term) | 85,600 | ||||
Inventory | 50,000 | ||||||
Long-Term Assets | Stockholders' Equity | ||||||
Gross fixed assets | $ | 526,000 | Common stock | $ | 150,000 | ||
Less: Accumulated depreciation | 150,700 | Paid-in capital | 70,000 | ||||
Net fixed assets* | 375,300 | Retained earnings | 95,800 | ||||
Total assets | $ | 528,400 | Total liabilities and equity | $ | 528,400 | ||
Sales (on credit) | $ | 1,326,000 |
Cost of goods sold | 790,000 | |
Gross profit | $ | 536,000 |
Selling and administrative expenseâ | 304,000 | |
Depreciation expense | 59,800 | |
Operating profit | $ | 172,200 |
Interest expense | 14,500 | |
Earnings before taxes | $ | 157,700 |
Tax expense | 99,600 | |
Net income | $ | 58,100 |
*Use net fixed assets in computing fixed asset turnover.
â Includes $13,500 in lease payments.
SMITH CORPORATION | |||||||
Current Assets | Liabilities | ||||||
Cash | $ | 38,400 | Accounts payable | $ | 83,300 | ||
Marketable securities | 12,700 | Bonds payable (long term) | 217,000 | ||||
Accounts receivable | 74,300 | ||||||
Inventory | 83,700 | ||||||
Long-Term Assets | Stockholders' Equity | ||||||
Gross fixed assets | $ | 504,000 | Common stock | $ | 75,000 | ||
Less: Accumulated depreciation | 255,800 | Paid-in capital | 30,000 | ||||
Net fixed assets* | 248,200 | Retained earnings | 52,000 | ||||
Total assets | $ | 457,300 | Total liabilities and equity | $ | 457,300 | ||
*Use net fixed assets in computing fixed asset turnover.
SMITH CORPORATION | ||
Sales (on credit) | $ | 1,100,000 |
Cost of goods sold | 640,000 | |
Gross profit | $ | 460,000 |
Selling and administrative expenseâ | 272,000 | |
Depreciation expense | 56,500 | |
Operating profit | $ | 131,500 |
Interest expense | 24,300 | |
Earnings before taxes | $ | 107,200 |
Tax expense | 56,500 | |
Net income | $ | 50,700 |
â Includes $13,500 in lease payments.
a. Compute the following ratios. (Use a360-day year. Do not round intermediate calculations. Input yourprofit margin, return on assets, return on equity, and debt tototal assets answers as a percent rounded to 2 decimal places.Round all other answers to 2 decimal places.)
|