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ADM 1340 Chapter Notes - Chapter 13: Cash Flow, Current Asset, Current Liability

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magentaox866
20 Apr 2017
School
University of Ottawa
Department
Administration
Course
ADM 1340
Professor
Darlene Himik

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ADM 1340 Full Course Notes
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ADM 1340 Full Course Notes
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Document Summary

Normal f/s show partial information on a company"s cash flow because they use the accrual basis. To provide information that enables users to assess a company"s ability to generate cash, and to assess what the company did with that cash. Users can assess f/s by comparing cash flows to evaluate changes in assets, liabilities, and financial structure. Historical cash flow information is useful to determine future cash flows. Enhances comparability of different companies because it eliminates the accrual-based effects of using different accounting treatments for similar transactions and events. The scf is required for both public and private corporations. The scf is prepared using cash and cash equivalents as its basis. Include a company"s principal revenue-producing activities and all other activities that are not investing or financing activities; arise from the cash effects of transactions that create revenues and expenses. Include the acquisition and disposal of non-current assets.

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Related Questions

FILL IN THE CORRECT TERMINOLOGIES IN THE BLANK SPACES
_____ 1. a. A method of internal (managerial accounting) reporting that emphasizes the distinction between variable and fixed costs.
_____ 2. b. A discounted cash flow approach to capital budgeting that computes the present value of all future cash flows.
_____ 3. c. Determination of the maximum cost a company can spend to make a product given a set volume, selling price and desired operating profit.
_____ 4. d. An analysis of the additional costs and benefits of a proposed alternative compared with the current situation.
_____ 5. e. A historical cost that the company has already incurred which is irrelevant to the decision making process.
_____ 6. f. Costs that will not continue if an ongoing operation is changed or deleted.
_____ 7. g. An already owned production site that is not currently in use.
_____ 8. h. The maximum available benefit foregone by using a resource for a particular purpose.
_____ 9. i. The predicted future costs and revenues that will differ among alternative courses of action.
_____ 10. J. The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project
_____ 11. k. Those costs of facilities and services that are shared by users
_____ 12. l. The juncture of manufacturing where separate products developed in the same process become individually identifiable.
_____ 13. m. A costing approach that considers all indirect manufacturing costs (both variable and fixed) to be product (inventoriable) costs.
_____ 14. n. Purchasing products or services from a supplier outside the company.
_____ 15. o. Capital budgeting models that focus on cash inflows and ouflows while taking into account the time value of money
_____ 16. p. Calculation of a selling price sufficient to cover the cost of producing a product as well as desired operating income
_____ 17 q. The long-term planning for investment commitments with returns spread over multiple years
_____ 18. r. A decision process that compares the differential revenues and costs of alternatives.
_____ 19. s. Costs that will continue even if a company discontinues one of its current operations
_____ 20. t. The increase in expected average annual operating income divided by the original required investment

Compare Companies --- Netflix (NFLX) vs. GEO Holdings (TOK) Compute financial ratios, time value, variables, and returns using industry standard tools for optimizing financial success. Analyze corporate financial data in evaluating past and future financial performances.

Use formulas to calculate the following financial indicators for each year of data: Three fiscal years for Netflix and GEO Holdings for:

o Price to earnings ratio

o Debt to equity ratio

o Free cash flow

o Earnings per share

o Return on equity

o Net profit margin

V. Performance Over Time

A. Analyze the performance of the Netflix over time. What financial strengths and weaknesses does this company have? Consider addressing the free cash flows and ratios you calculated earlier.

B. Analyze the performance of your GEO Holdings over time. What financial strengths and weaknesses does this company have? Consider addressing the free cash flows and ratios you calculated earlier.

C. Analyze how the data differ between these two companies. Why do you think this is? Consider addressing the free cash flows and ratios you calculated earlier.

VI. Investment

A. Are the companies considered growth or value companies? Why?

B. Which company’s stock is the better investment?

Netflix Inc. (NMS: NFLX)
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date 12/31/2016 12/31/2015 12/31/2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Cash & cash equivalents 1467576 1809330 1113608
Short-term investments 266206 501385 494888
Current content library, net - - 2125702
Current content assets, net 3726307 2905998 -
Other current assets 260202 215127 206271
Total current assets 5720291 5431840 3940469
Non-current content library, net - - 2773326
Non-current content assets, net 7274501 4312817 -
Information technology assets 185345 194054 189274
Furniture & fixtures 32185 30914 25758
Building 40681 40681 40681
Leasehold improvements 107945 107793 57339
DVD operations equipment 70152 88471 89144
Capital work-in-progress 108296 8845 12495
Property & equipment, gross 544604 470758 414691
Less: accumulated depreciation 294209 297346 264816
Property & equipment, net 250395 173412 149875
Other non-current assets 341423 284802 192981
Total assets 13586610 10202871 7056651
Current content liabilities 3632711 2789023 2117241
Accounts payable 312842 253491 201581
Accrued expenses 197632 140389 69746
Deferred revenue 443472 346721 274586
Total current liabilities 4586657 3529624 2663154
Non-current content liabilities 2894654 2026360 1575832
Long-term debt 3364311 2371362 900000
Other non-current liabilities 61188 52099 59957
Total liabilities 10906810 7979445 5198943
Common stock 1599762 1324809 60
Additional paid-in capital - - 1042810
Foreign currency -47966 -42502 -4615
Change in unrealized gains on available for sale securities -599 -806 169
Accumulated other comprehensive income (loss) -48565 -43308 -4446
Retained earnings (accumulated deficit) 1128603 941925 819284
Total stockholders' equity (deficiency) 2679800 2223426

1857708
Geo Holdings Corp (TOK: 2681)
Due to changes with International Financial Reporting Standards (IFRS), recent financials statement presentations have been adjusted to meet this standard. Please note the original historical presentations have remained in the original format
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date 03/31/2016 03/31/2015 03/31/2014
Currency JPY JPY JPY
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Millions Millions Thousands
Cash & deposits 37683 32052 19869000
Trade notes & accounts receivables 4100 4077 3992000
Merchandise 24894 23834 23495000
Deferred tax assets 2156 1806 1773000
Other current assets 5462 7181 5942000
Allowance for doubtful accounts -281 -292 343000
Total current assets 74015 68659 54729000
Asset for rent, gross 100974 104514 104647000
Accumulated depreciation - asset for rent -95154 -97475 96055000
Asset for rent, net 5820 7038 8591000
Buildings & structures, gross 40872 39984 39478000
Accumulated depreciation - buildings & structures -27470 -26362 25976000
Buildings & structures, net 13402 13622 13501000
Land, net 5844 6356 6651000
Leased assets, gross 2176 3519 4576000
Accumulated depreciation - leased assets -681 -1764 2588000
Leased assets, net 1495 1754 1988000
Other property, plant & equipment, gross 24838 20562 17708000
Accumulated depreciation - other property, plant & equipment -18391 -15292 13236000
Other property, plant & equipment, net 6447 5270 4471000
Total property, plant & equipment 33010 34043 35205000
Total intangible assets 1865 1277 2028000
Investment securities 926 1002 1266000
Long-term loans receivable 2250 6682 6628000
Lease & guarantee deposits 14905 14735 15034000
Deferred tax assets 3342 3774 2845000
Other investments & other assets 1222 1188 1760000
Allowance for doubtful accounts -1332 -3751 3917000
Total investments & other assets 21315 23632 23617000
Total non-current assets 56192 58952 60851000
Total assets 130207 127612 115581000
Trade accounts payable 12631 13540 13124000
Current portion of long-term borrowings 8333 7097 8754000
Current portion of bonds 149 149 249000
Income taxes payable 4815 265 1170000
Reserve for bonuses 1665 1420 1135000
Other current liabilities 10135 12595 10279000
Total current liabilities 37731 35068 34713000
Bonds 105 254 403000
Long-term borrowings 19509 21843 13910000
Lease liabilities 1612 1660 1590000
Deferred tax liabilities 23 22 26000
Asset retirement obligations 4406 3994 3898000
Other non-current liabilities 1857 1554 1839000
Total non-current liabilities 27514 29329 21668000
Total liabilities 65246 64398 56381000
Capital stock 8871 8615 8603000
Capital surplus 3283 6090 6078000
Retained earnings 52542 49998 44381000
Treasury shares - -1979 334000
Total shareholders' equity 64697 62724 58729000
Valuation difference on available-for-sale securities 166 282 297000
Loss (gain) on deferred hedge -15 - 297000
Total accumulated other comprehensive income 150 282 172000
Stock acquisition rights 113 206 59199000
Net assets 64961 63214 115581000
Total liabilities & net assets 130207 127612
Netflix Inc. (NMS: NFLX)
Exchange rate used is that of the Year End reported date
As Reported Annual Income Statement
Report Date 12/31/2016 12/31/2015 12/31/2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Revenues 8830669 6779511 5504656
Cost of revenues 6029901 4591476 3752760
Marketing expenses 991078 824092 607186
Technology & development expenses 852098 650788 472321
General & administrative expenses 577799 407329 269741
Operating income (loss) 379793 305826 402648
Interest expense 150114 132716 50219
Interest & other income (expense) 30828 -31225 -3060
Income before income taxes - United States 188078 95644 325081
Income (loss) before income taxes - foreign 72429 46241 24288
Income (loss) before income taxes 260507 141885 349369
Current tax provision (benefit) - federal 54315 52557 86623
Current tax provision (benefit) - state 5790 -1576 9866
Current tax provision (benefit) - foreign 60571 26918 16144
Total current tax provision (benefit) 120676 77899 112633
Deferred tax provision (benefit) - federal -24383 -37669 -10994
Deferred tax provision (benefit) - state -14080 -17635 -17794
Deferred tax provision (benefit) - foreign -8384 -3351 -1275
Total deferred tax provision (benefit) -46847 -58655 -30063
Provision for (benefit from) income taxes 73829 19244 82570
Net income (loss) 186678 122641 266799
Weighted average shares outstanding - basic 428822 425889 420546
Weighted average shares outstanding - diluted 438652 436456 431893
Year end shares outstanding 430054.212 427940.44 422910.887
Net income (loss) per share - basic 0.44 0.29 0.634
Net income (loss) per share - diluted 0.43 0.28 0.617
Number of full time employees 4500 3500 2189
Number of part time & temporary employees 200 400 261
Total number of employees 4700 3700 2450
Number of common stockholders 290 237 203
Foreign currency translation adjustments -5464 -37887 -
Geo Holdings Corp (TOK: 2681)
Exchange rate used is that of the Year End reported date
As Reported Annual Income Statement
Report Date 03/31/2016 03/31/2015 03/31/2014
Currency JPY JPY JPY
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Millions Millions Thousands
Total revenue 267910 270308 262324000
Cost of sales -151798 -157825 152301000
Gross profit 116112 112483 110022000
Selling, general & administrative expenses -99559 -102925 100823000
Operating income 16552 9558 9198000
Interest & dividend income 49 114 111000
Rental income 1268 1167 1193000
Other non-operating income 1043 1062 453000
Total non-operating income 2361 2343 1758000
Interest expense -230 -231 332000
Rental expenses -759 -609 595000
Transfer to reserve for doubtful account - -227 -
Other non-operating expenses -100 -803 -
Total non-operating expenses -1089 -1871 684000
Ordinary income 17824 10030 1612000
Imapirment loss -1319 -1543 9344000
Other extraordinary losses -13 - 203000
Total extraordinary losses -1333 -1543 203000
Income before income taxes 16491 8486 1218000
Income taxes - current -5779 -2074 514000
Income taxes - deferred -147 925 87000
Total income taxes -5927 -1149 1821000
Profit 10563 7337 7726000
Profit attributable to owners of parent 10563 7337 4027000
Average number of shares outstanding - basic 51.331 53.169 -39000
Average number of shares outstanding - diluted 51.623 53.29 3987000
Year end shares outstanding 48.244 52.295 3738000
Earnings per share - basic 205.78 137.99 -70000
Earnings per share - diluted 204.62 137.68 3808000
Number of full time employees 3825 3579 53996.5
Number of part time employees 10421 10114 54066.499
Number of common stockholders 57105 65030 53996.5
Which of the following tends to insulate management somewhat from the financial results of poor financial planning? (Pick the best answer.)
A. Capitated rates
B. Cost reimbursement
C. Bundled services
D. Charge payment
5 points
Question 2
The cash budget focuses on which of the following major activities:
A. Purchasing of resources
B. Collection
C. Production/sale of service
D. All of the above
5 points
Question 3
Which of the following is an element of budgeted financial requirements that is not included in budgeted expenses?
A. Interest expense
B. Increases in working capital
C. Labor expense
D. A and B
E. None of the above
5 points
Question 4
A department manager most often uses his or her hospitals’ financial information for which of the following uses:
A. Assess the financial condition of the hospital
B. Assess the efficiency of operations
C. Evaluate the hospital’s stewardship
D. Assess the effectiveness of operations
5 points
Question 5
18. You have just advance refunded $50 million of outstanding tax-exempt revenue bonds with $40 million of new debt, which created a gain after considering reimbursement effects of $5.0 million. What could account for this?
A. Higher interest rate on the refunding issue
B. Lower interest rate on the refunding issue
C. Positive arbitrage on the refunding issue
D. None of the above
5 points
Question 6
A not-for profit nursing home has total expenses of $20 million. Sales tax in the state is 7%. Expenses are broken down into salaries ($12 million), supplies ($6 million), and pharmacy ($2 million). The benefit received by the nursing home from the sales tax exemption assuming that pharmacy items are exempt from state sales tax is?
A. $1.4 million
B. $1.26 million
C. $420,000
D. $480,000
5 points
Question 7
Which of the following is not one of the four critical questions that must be answered for dashboard reporting?
A. What is the firm’s strategic vision?
B. What is most important to the firm’s success?
C. What are the critical drivers that influence performance attainment?
D. What are the most relevant measures that reflect critical driver relationships?
5 points
Question 8
What of the following is not one of the characteristics of long-term debt financing?
A. Cost
B. Control
C. Risk
D. Inventory
5 points
Question 9
The controller in a hospital is usually responsible for which of the following activities (choose all that apply):
A. Collection of accounts receivable
B. Developing budgets
C. Filing Medicare cost reports
D. Arranging hospital loans
5 points
Question 10
The heading of every financial statement should contain the:
A. name, title, and place of business
B. name, title, and specific date of statement
C. name, title, specific date of statement, and unit of measurement
D. title, name, type of ownership, and unit of measurement
5 points
Question 11
The Catholic Healthcare Association recognizes which of the following as legitimate areas of community benefit?
A. Bad Debts
B. Unreimbursed Medicare Costs
C. Both A and B
D. Neither A nor B
5 points
Question 12
The following is an example of a _____________ budget: “The budget for the radiology department is different at 90 percent occupancy than at 80 percent occupancy.”
A. rolling
B. forecast
C. flexible
D. fixed
5 points
Question 13
Which of the following is not a “principle” of financial accounting?
A. Historical cost
B. Revenue recognition
C. Continuity
D. Matching
5 points
Question 14
Accounts receivable (net) increased by $500,000 during the year. This increase has what effect on cash flow?
A. Reduces it
B. Increases it
C. No effect
D. All of the Above
5 points
Question 15
What should be a firm’s primary long-term financial objective?
A. profit growth
B. debt growth
C. asset growth
D. equity growth
5 points
Question 16
A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):
A. Income statement
B. Statement of retained earnings
C. Balance sheet
D. Statement of cash flows
5 points
Question 17
Strategic planning should _________ financial planning.
A. follow
B. precede
C. be contemporaneous with
D. None of the above
5 points
Question 18
The statistics budget:
A. forecasts operating revenues that will be earned during the budget period
B. identifies the amount of service that will be provided by departmental area
C. represents an organization's expected cash inflows and outflows based on the previous years' cash flows
D. identifies operating expenses that are expected to be incurred during the budget period
5 points
Question 19
What is net working capital?
A. Current assets less long-term liabilities
B. Current assets less current liabilities
C. The amount of permanent financing required to finance working capital or current assets.
D. Both B and C
5 points
Question 20
The working capital cycle looks at which of the following:
A. Obtaining cash
B Turning cash into resources and paying bills
C. billing and collecting revenues earned
D. All of the above
5 points
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