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Lecture 8

ACG 2021 Lecture 8: Lecture 8

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Florida State University
ACG 2021

Lecture 8 Retained earnings - the net income retained in the corporation Retained earnings statement - shows the amounts and causes of changes in retained earnings for a specific period of time Balance sheet - lists a firm's assets and claims to those assets at a SPECIFIC point in time Asset claims are divided into 2 main categories - liabilities and stockholders' equity Balance sheets follow the basic accounting equation - assets = liabilities + equity assets - anything owned Liabilities - anything owed Equity - what's left (assets-liabilities) owner's share 2 sources of equity 1. equity contributed by owners (common stock) 2. equity earned by operations (retained earnings) Statement of cash flows - provides information about the cash receipts and cash payments of a firm for a specific period of time - involves operating, investing, and financing activities Cash from operating activities 1. cash receipts (inflows) from sales, services, commissions, fees, and also from interest and dividends. 2. Cash payments (outflows) for inventories, salaries, operating expenses, interest, and taxes Cash from investing activities 1. Cash receipts (inflows) from selling long term assets (property, plant, equipment), or marketable securities (stocks & bonds), as well as collecting loans. |Selling PP&E/Stocks&Bonds/Loans 2. Cash payments (outflows) for purchasing long term assets (property, plant, equipment), or marketable securities, as well as lending to others.***Buying PP&E/Stocks&Bonds/Loans Cash
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