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AFM101 Chapter Notes - Chapter 5: Current Liability, Cash Flow

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lilacmouse857
7 Jun 2018
School
University of Waterloo
Department
Accounting & Financial Management
Course
AFM101
Professor
Donna Psutka

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Manipulation of accounting equations
o Assets = liailities + shae holde’s euity
o Cash + Non ash Assets = liailities + shae holde’s euity
o Cash = liailities + shae holde’s euity – non cash assets
Decrease in Non Cash Assets or Increase in Liabilities and SE is cash inflow
Increase in Non Cash Assets or Decrease in Liabilities and SE is cash outflow
Reporting Cash Flows from Operating Activities – Indirect Method
o General structure is as follows:
▪ Operating Activities
▪ Net Earnings
▪ Add/Subtract items not affecting cash:
• + Depreciation expense
• + Decreases in non cash current assets
• - Increases in non cash current assets
• + Increases in current liabilities
• - Decreases in current liabilities
▪ Net Cash Flows from Operating Activities
• Change in Trade Receivables (cash collections from customers) found on
statement of financial position
• Change in inventory found on the statement of financial position
Change in prepayments (cash paid in advance) found on the statement of
earnings
• Change in trade payables (cash purchases on account)
• Change in Accrued Liabilities (this is to balance the change in accrued
expenses recorded onto the statement of earnings)
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Related Questions

Complete the following schedule using the indirect method to create the operating activity for the statement of cash flows (i.e. fill in the appropriate “+” or “–”) :

Net Income

non-cash items reflected in Net Income above:

_____ Depreciation

_____ Gain on sale of an asset

_____ Loss on sale of an asset

Changes in current assets and current liabilities

_____ Decreases in current assets

_____ Increases in current assets

_____ Decreases in current liabilities

_____ Increases in current liabilities

What are the Balance Sheet Ratios (debt-to-asset and debt-to-equity ratios) for the following financial information? (PLEASE SHOW WORK SO I CAN UNDERSTAND HOW THIS WAS DONE. Thank you)

GENERAL ELECTRIC CO (GE) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Assets
Current assets
Cash
Cash and cash equivalents 90208 70483
Short-term investments 47907 31973
Total cash 138115 102456
Receivables 23237 27022
Inventories 17689 22515
Other current assets 233911 18834
Total current assets 412952 170827
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 113321 90961
Accumulated Depreciation -46934 -35927
Net property, plant and equipment 66387 54095
Equity and other investments 33822 12673
Goodwill 76553 65526
Intangible assets 14156 16745
Deferred income taxes 2541 3105
Other long-term assets 41938 169721
Total non-current assets 235397 321865
Total assets 648349 492692
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 79231 50810
Accounts payable 16338 13680
Accrued liabilities 12537 15776
Other current liabilities 54990 25764
Total current liabilities 163096 106030
Non-current liabilities
Long-term debt 222910 147466
Deferred taxes liabilities
Pensions and other benefits 40487
Minority interest 8674 1864
Other long-term liabilities 125510 98571
Total non-current liabilities 357094 288388
Total liabilities 520190 394418
Stockholders' equity
Preferred stock 6
Common stock 702 702
Additional paid-in capital 32889 37613
Retained earnings 155333 140020
Treasury stock -42593 -63539
Accumulated other comprehensive income -18172 -16528
Total stockholders' equity 128159 98274
Total liabilities and stockholders' equity 648349 492692
GENERAL ELECTRIC CO (GE) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Revenue 148589 117386
Cost of revenue 81311 82693
Gross profit 67278 34693
Operating expenses
Sales, General and administrative 30572 17831
Other operating expenses 9995
Total operating expenses 40567 17831
Operating income 26711 16862
Interest Expense 9482 3463
Other income (expense) -5213
Income before taxes 17229 8186
Provision for income taxes 1772 6486
Net income from continuing operations 15457 1700
Net income from discontinuing ops -112 -7495
Other -112 -331
Net income 15233 -6126
Preferred dividend 18
Net income available to common shareholders 15233 -6144
Earnings per share
Basic 1.51 -0.62
Diluted 1.5 -0.61
Weighted average shares outstanding
Basic 10045 9944
Diluted 10123 10016
EBITDA 35994 16496
GENERAL ELECTRIC CO (GE) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Cash Flows From Operating Activities
Net income 15345 -6126
Depreciation & amortization 9283 4847
Deferred income taxes -1186 383
(Gain) Loss from discontinued operations 112 7495
Accounts receivable
Inventory -872 -314
Accounts payable 305 -541
Other working capital -2428 -1048
Other non-cash items 7151 15195
Net cash provided by operating activities 27710 19891
Cash Flows From Investing Activities
Investments in property, plant, and equipment -13727 -7309
Property, plant, and equipment reductions 6262 3020
Acquisitions, net 311 -9744
Sales/Maturities of investments
Other investing activities 2124 73521
Net cash used for investing activities -5030 59488
Cash Flows From Financing Activities
Debt issued 37548 13951
Debt repayment -47038
Preferred stock issued
Common stock issued 2842
Dividend paid -8851 -9295
Other financing activities -48497 -33672
Net cash provided by (used for) financing activities -16958 -76054
Effect of exchange rate changes -3492 -3464
Net change in cash 2230 -139
Cash at beginning of period 88787 91017
Cash at end of period 91017 90878
Free Cash Flow
Operating cash flow 27710 19891
Capital expenditure -13727 -7309
Free cash flow 13983 12582

What is the return on Invested Capital (ROIC) for the financial data? (PLEASE SHOW WORK SO I CAN UNDERSTAND HOW THIS WAS DONE. Thank you)

GENERAL ELECTRIC CO (GE) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Assets
Current assets
Cash
Cash and cash equivalents 90208 70483
Short-term investments 47907 31973
Total cash 138115 102456
Receivables 23237 27022
Inventories 17689 22515
Other current assets 233911 18834
Total current assets 412952 170827
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 113321 90961
Accumulated Depreciation -46934 -35927
Net property, plant and equipment 66387 54095
Equity and other investments 33822 12673
Goodwill 76553 65526
Intangible assets 14156 16745
Deferred income taxes 2541 3105
Other long-term assets 41938 169721
Total non-current assets 235397 321865
Total assets 648349 492692
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 79231 50810
Accounts payable 16338 13680
Accrued liabilities 12537 15776
Other current liabilities 54990 25764
Total current liabilities 163096 106030
Non-current liabilities
Long-term debt 222910 147466
Deferred taxes liabilities
Pensions and other benefits 40487
Minority interest 8674 1864
Other long-term liabilities 125510 98571
Total non-current liabilities 357094 288388
Total liabilities 520190 394418
Stockholders' equity
Preferred stock 6
Common stock 702 702
Additional paid-in capital 32889 37613
Retained earnings 155333 140020
Treasury stock -42593 -63539
Accumulated other comprehensive income -18172 -16528
Total stockholders' equity 128159 98274
Total liabilities and stockholders' equity 648349 492692
GENERAL ELECTRIC CO (GE) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Revenue 148589 117386
Cost of revenue 81311 82693
Gross profit 67278 34693
Operating expenses
Sales, General and administrative 30572 17831
Other operating expenses 9995
Total operating expenses 40567 17831
Operating income 26711 16862
Interest Expense 9482 3463
Other income (expense) -5213
Income before taxes 17229 8186
Provision for income taxes 1772 6486
Net income from continuing operations 15457 1700
Net income from discontinuing ops -112 -7495
Other -112 -331
Net income 15233 -6126
Preferred dividend 18
Net income available to common shareholders 15233 -6144
Earnings per share
Basic 1.51 -0.62
Diluted 1.5 -0.61
Weighted average shares outstanding
Basic 10045 9944
Diluted 10123 10016
EBITDA 35994 16496
GENERAL ELECTRIC CO (GE) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data. 2014-12 2015-12
Cash Flows From Operating Activities
Net income 15345 -6126
Depreciation & amortization 9283 4847
Deferred income taxes -1186 383
(Gain) Loss from discontinued operations 112 7495
Accounts receivable
Inventory -872 -314
Accounts payable 305 -541
Other working capital -2428 -1048
Other non-cash items 7151 15195
Net cash provided by operating activities 27710 19891
Cash Flows From Investing Activities
Investments in property, plant, and equipment -13727 -7309
Property, plant, and equipment reductions 6262 3020
Acquisitions, net 311 -9744
Sales/Maturities of investments
Other investing activities 2124 73521
Net cash used for investing activities -5030 59488
Cash Flows From Financing Activities
Debt issued 37548 13951
Debt repayment -47038
Preferred stock issued
Common stock issued 2842
Dividend paid -8851 -9295
Other financing activities -48497 -33672
Net cash provided by (used for) financing activities -16958 -76054
Effect of exchange rate changes -3492 -3464
Net change in cash 2230 -139
Cash at beginning of period 88787 91017
Cash at end of period 91017 90878
Free Cash Flow
Operating cash flow 27710 19891
Capital expenditure -13727 -7309
Free cash flow 13983 12582