FINAN 450 Lecture Notes - Lecture 2: Current Liability, Cash Flow, Financial Statement

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pearmallard749

27 Jan 2017

School

Kansas State University

Department

Finance

Course

FINAN 450

Professor

Katherine Wilkinson

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Document Summary

Types of assets always listed in order of liquidity (the speed and ease of conversion to cash without significant loss of value: current short term assets, anything that can be quickly converted to cash. Net working capital current assets minus current liabilities. Debt vs equity shareholders equity = assets liabilities. Book value the balance sheet value of the assets, liabilities, and equity. Market value true value, the price at which the assets, liabilities, or equity can actually be bought or sold: market value is more important to the decision making process than book value. Financial statements: gaap matching principle matches expenses required to generate revenue to the period of recognition, recognizes revenue when it is fully earned. Noncash items: expenses charged against revenue that do not affect cash flow, depreciation is the most important. Earnings management: smoothing earnings, gaap lea(cid:448)es (cid:862)(cid:449)iggle room(cid:863, global standardization of accounting. Marginal tax rates: % tax paid on the next dollar.

Related Questions

Using the 2005 and 2006 Statement of Financial Position (SFP) and the Statement of Earnings (SE) found on pages 465 and 466, complete a vertical analysis (common-sized statements) for both years and a horizontal analysis (trend) from 2005 to 2006.Please show work.......thanks

Table13:1

Bayside Memorial Hospital Statements of Operations (Income Statements) Years Ended December 31, 2006 and 2005 (Thousands of dollars 2006 2005

Net Patient Service Revenue $108,600 $97,393

Premium revenue 5,232 4,622

Other revenue $ 3,644 6,014

Total revenues $117,476 $108,029

Expense:

Nursing Services $58,245 56,752

Dietary Services 5,424 4,718

General services 13,198 11,655

Administrative services 11,427 11,585

Employee health and welfare 10,250 10,705

Provision for uncollectible 3,328 3,469

Provision for malpractice 1,320 1,204

Depreciation 4,130 4,025

Interest expense 1,542 1,521

Total Expense $108,904 $105,634

Net Income $8,572 $2,395

Balance Sheet

Table 13.2 contains Bay sideâs 2005 and 2006 balance sheets. Although the assets are all stated in terms of dollars, only cash represents actual money we see that bayside can if it liquidated its short-term investment securities. Write checks at the end of 2006 for a total $6,263,000 (verse total current liabilities of $13,332,000 due during 2006). The noncash current assets will presumably be converted to cash within a year, but they do not represent cash on hand.

Then Claims against assets are two types: 1) liabilities, or money the firm owes, and 2) equity, also called net assets or fund capital. Equity is a residual, so for 2006

Assets -Liabilities = Equity

151,278,000 - ($13,332,000+$30,582,000) =$107,364,000

Liabilities consist of $(13,332,000 of current liabilities plus $30,582,000of long-term liabilities. If assets decline in value-suppose some of Baysideâ s fixed assets were sold at less that book value-liabilities remain constant, so the value of the equity capital declines.

Table 13:2 Bayside Memorial Hospital Balance Sheets December 31, 2006 and 2005 (thousand of dollars)

2006 2005

Cash $4,263 $5,095

Short-term investments 2,000 0

Accounts receivable 21,840 20,738

Inventories 3,177 2,982

Total current assets $31,280 $28,815

Gross plant and equipment $145,168 $140,865

Accumulated depreciations 25,160 21,030

Net plant and equipment $119,998 $119,835

Total assets $151,278 $148,650

Accounts payable $4,707 $5,145

Accrued expenses 5,650 5,421

Notes payable 825 4,237

Current portion of long-term debt 2,150 2,000

Total current liabilities $13,332 $16,803

Long-term debt $28,750 $30,900

Capital lease obligations 1,832 2,155

Total long-term liabilities $30,582 $33,055

Net assets (equity) $107,364 $98,792

Total liabilities and net assets $151,278 $148,650

What are the Market Value Leverage Ratios (Value of Debt to Value of Equity, Value of Debt to Value of Assets)) for the following 2015 and 2016 financial data? (PLEASE SHOW WORK SO I CAN UNDERSTAND HOW THIS WAS DONE. Thank you)

AMAZON.COM INC (AMZN) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Revenue	107006	135987
Cost of revenue	71651	88265
Gross profit	35355	47722
Operating expenses
Sales, General and administrative	20411	27284
Other operating expenses	12711	16252
Total operating expenses	33122	43536
Operating income	2233	4186
Interest Expense	459	484
Other income (expense)	-206	190
Income before income taxes	1568	3892
Provision for income taxes	950	1425
Other income	-22	-96
Net income from continuing operations	596	2371
Net income	596	2371
Net income available to common shareholders	596	2371
Earnings per share
Basic	1.28	5.01
Diluted	1.25	4.9
Weighted average shares outstanding
Basic	467	474
Diluted	477	484
EBITDA	8308	12492

AMAZON.COM INC (AMZN) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	15890	19334
Short-term investments	3918	6647
Total cash	19808	25981
Receivables	6423	8339
Inventories	10243	11461
Deferred income taxes
Total current assets	36474	45781
Non-current assets
Property, plant and equipment
Land	9770	13998
Fixtures and equipment	18417	25989
Other properties	1866	2454
Property and equipment, at cost	30053	42441
Accumulated Depreciation	-8215	-13327
Property, plant and equipment, net	21838	29114
Goodwill	3759	3784
Intangible assets
Deferred income taxes	1084
Other long-term assets	2289	4723
Total non-current assets	28970	37621
Total assets	65444	83402
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable	20397	25309
Accrued liabilities	10384	13739
Deferred revenues	3118	4768
Total current liabilities	33899	43816
Non-current liabilities
Long-term debt	8235	7694
Capital leases	5948	7519
Deferred taxes liabilities		392
Other long-term liabilities	3978	4696
Total non-current liabilities	18161	20301
Total liabilities	52060	64117
Stockholders' equity
Common stock	5	5
Additional paid-in capital	13394	17186
Retained earnings	2545	4916
Treasury stock	-1837	-1837
Accumulated other comprehensive income	-723	-985
Total stockholders' equity	13384	19285
Total liabilities and stockholders' equity	65444	83402

AMAZON.COM INC (AMZN) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Cash Flows From Operating Activities
Net income	596	2371
Depreciation & amortization	6281	8116
Investments losses (gains)	5
Deferred income taxes	81	-246
Stock based compensation	2119	2975
Accounts receivable	-1755	-3367
Inventory	-2187	-1426
Accounts payable	4294	5030
Accrued liabilities	913	1724
Other working capital	1292	1955
Other non-cash items	281	-689
Net cash provided by operating activities	11920	16443
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-4589	-6737
Acquisitions, net	-795	-116
Purchases of investments	-4091	-7756
Sales/Maturities of investments	3025	4733
Net cash used for investing activities	-6450	-9876
Cash Flows From Financing Activities
Long-term debt issued	353	621
Long-term debt repayment	-4235	-4361
Excess tax benefit from stock based compensation	119	829
Repurchases of treasury stock
Net cash provided by (used for) financing activities	-3763	-2911
Effect of exchange rate changes	-374	-212
Net change in cash	1333	3444
Cash at beginning of period	14557	15890
Cash at end of period	15890	19334
Free Cash Flow
Operating cash flow	11920	16443
Capital expenditure	-4589	-6737
Free cash flow	7331	9706
Supplemental schedule of cash flow data
Cash paid for income taxes	273	412
Cash paid for interest	478	496

maroonferret916

Total Current Asset Current Ratio Effect on Net Income

a		Cash is acquired through issuance of additional common stock		____		____		____
b	Merchandise is sold for cash		____		____		____
c	Federal income tax due for the previous year is paid		____		____		____
d	A fixed asset is sold for less than book value		____		____		____
e	A fixed asset is sold for more than book value		____		____		____
f	Merchandise is sold on credit		____		____		____
g	Payment is made to trade creditors for previous purchases		____		____		____
h	A cash dividend is declared and paid		____		____		____
I	Cash is obtained through short- term bank loans		____		____		____
J	Short- term notes receivable are sold at a discount		____		____		____
k	Marketable securities are sold below cost		____		____		____
L	Advances are made to employees		____		____		____
m	Current operating expenses are paid		____		____		____
n	Short- term promissory notes are issued to trade creditors in exchange for past due accounts payable		____		____		____
o	10- year notes are issued to pay off accounts payable		____		____		____
p	A fully depreciated asset is retired		____		____		____

4 DEBT RATIO- Bartley Barstools has an equity multiplier of 2.4, and its assets are financed with some combination of long-term debt and common equity. What is its equity ratio? What is its debt ratio?

6 MARKET/BOOK RATIO- Jaster Jets has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt and $6 billion in common equity. It has 800 million shares of common stock outstanding, and its stock price is $32 per share. What is Jaster

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FINAN 450 Lecture Notes - Lecture 2: Current Liability, Cash Flow, Financial Statement

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