ENT 500 Lecture Notes - Lecture 13: Earnings Before Interest And Taxes, Financial Statement, Cash Flow

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skyrat880

17 May 2016

School

Ryerson University

Department

Entrepreneurship and Strategy

Course

ENT 500

Professor

Steven Tissenbaum

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Document Summary

Chapter 13 evaluating and managing financial performance. Financial statement reports of a firm"s financial performance and resources, including an income statement, balance sheet, and a cash flow. Helps to determine a start-up"s financial requirements, and assesses the financial implications of a business plan. Income statement shows profit or loss of a firm over a given period of time. Revenue from products or service sales, costs of producing product, operating expenses, financing costs, tax payments. Gross profit sales less the costs of goods sold. Cost of goods sold (cogs) cost of producing or acquiring goods to be sold. Operating expenses costs related to general administrative expenses and selling and marketing a product or service. Operating income earnings before interest and taxes are paid. Financing costs amount of interest owed to lenders on borrowed money. Net income available to owners income that may be distributed to the owners or reinvested in the company.

Related Questions

On the following page are the Consolidated Statements of Income and Parent Company Profit and Loss Statement of Vantaa Corporation (Finland) from the companyâs 2009 annual report.

Vantaa Corporation Consolidated Statements of Income June 30, 2009
	2009 FIM million
Net sales	12,795
Cost of goods sold	(9,178)
Gross profit	3,617
Selling, marketing, and administrative expenses	(1,328)
Other income and expenses, net	204
Operating profit	2,493
Share in results of associated companies	2
Interest and other financial expenses, net	(78)
Profit before extraordinary items and income taxes	2,417
Extraordinary items	-
Profit before income taxes	2,417
Income taxes	(962)
Profit before minority interest	1,455
Minority interests	-
Net profit	1,455
Earnings per share, FIM	15.47

Vantaa Corporation Parent Company Profit and Loss Statement June 30, 2009
	2009 FIM million
Net sales	20
Cost of goods sold	(29)
Gross margin	(9)
Administrative expenses	(50)
Other income and expenses, net	125
Operating profit	66
Interest and other financial expenses, net	(173)
Loss before contribution, untaxed reserves and income taxes	(107)
Group contributions	470
Decrease in untaxed reserves	-
Increase in accelerated depreciation	(1)
Profit before income taxes	362
Income taxes	(108)
Net profit	254

Compare the net income and other important items in the two financial statements. Does this influence your opinion about the operating performance of the company? In your opinion, which statement is more informative from 1) a user perspective, 2) a management perspective?

olivealligator582

Bells manufacturing estimates that the sales for the 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest expense remained unchanged at $24,500. Bells Manufacturing is planning on paying cash dividends of $85,000 during 2016. Refer to the financial data in the table while answering the following

a. Compile the pro forma income statement for the year ended December 31, 2016, using the percentage of sales method.

b. Compile the pro forma income statement for the year ended December 31, 2016, using the fixed and variable cost data

c. As the financial manager, which of the two pro forma statements would you regard as more accurate, explain.

Bell Manufacturing

Income Statement for the Year

Ended December 31, 2015

Sales Revenue $1,800,000

Less Cost of Goods sold $1,100,000

Gross Profits $700,000

Less: Operating Expenses $450,000

Operating Profits $250,000

Less: Interest Expense $24,500

Net Profits before taxes $225,500

Less: Taxes (rate = 40%) $90,200

Net Profit after taxes $135,300

Less: Cash Dividends $85,000

To retained earnings $50,300

--------------------------------------------------------------------------------------------

Bell Manufacturing Breakdown

Of Cost and Expenses into Fixed

And Variable Components for the

Year Ended December 31, 2015

Cost of goods sold

Fixed cost $750,000

Variable cost $350,000

Total Costs $1,100,000

Operating Expenses

Fixed expenses $155,000

Variable expenses $295,000

Total Expense $450,000

The Anshul Corporation used an inventory method for its taxreturn that was different from the one it used when it prepared theincome statement it distributed to its owners. Some of thedifferences between its tax return and the income statement itdistributed to owners are shown below.

	Tax Return	Owners' Income Statement
Sales	$700,000	$700,000
Cost of goods sold	$330,000	$300,000
Operating expenses	$370,000	$400,000
Income taxes expense	$129,500	$140,000
Net income	$240,500	$260,000

Determine how much more or less cash the company has availableby using a different inventory method for tax purposes than it usedwhen it prepared the income statement distributed to itsowners.

	a.	$19,500 less
	b.	$19,500 more
	c.	$10,500 less
	d.	$10,500 more

ENT 500 Lecture Notes - Lecture 13: Earnings Before Interest And Taxes, Financial Statement, Cash Flow

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