...showing a firm's accounting value on a particular date is the: A. income statement. B. balance sheet. C. statement of cash flows. D. tax reconciliation statement. E. shareholders' equity sheet. A current asset is: A. an item currently owned by the firm. B. an item that the firm expects to own within the next year. C. an item currently owned by the firm that will convert to cash within the next 12 months. D. the amount of cash on hand the firm currently shows on its balance sheet. E. the market value of all items currently owned by the firm. The long-term debts of a firm are liabilities: A. that come due within the next 12 months. B. that do not come due for at least 12 months. C. owed to the firm's suppliers. D. owed to the firm's shareholders. E. the firm expects to incur within the next 12 months. Net working capital is defined as: A. total liabilities minus shareholders' equity. B. current liabilities minus shareholders' equity. C. fixed assets minus long-term liabilities. D. total assets minus total liabilities. E. current assets minus current liabilities. A(n) ____ asset is one which can be quickly converted into cash without significant loss in value. A. current B. fixed C. intangible D. liquid E. long-term The financial statement summarizing a firm's accounting performance over a period of time is the: A. income statement. B. balance sheet. C. statement of cash flows. D. tax reconciliation statement. E. shareholders' equity sheet. Noncash items refer to: A. the credit sales...
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...CHAPTER THIRTEEN The Cash Flow Statement and Decisions Review Previous chapters examined the information provided by the income statement, balance sheet, and statement of changes in owners’ equity. Fits Where This Chapter In addition, a brief introduction to the cash flow statement was provided in Chapters 2 and 3. Where This Chapter Fits This chapter examines the cash flow statement in depth and focuses on how the information provided by this important statement is used for financial decisions. Looking Ahead Chapters 14 and 15 complete an in-depth look at the Looking Ahead financial statements and how the information provided is useful for decision making. 492 The Personal View The Business View Why am I always broke? My job pays a de- The German company Siemens is a $60 cent salary, but somehow I never have billion conglomerate that manufactures cash when I need it. I get paid on the first everything from power stations to semi- of the month, but most of that goes for rent conductors. The company is known for its and food. My car payment is due on the expert cash management and earns as tenth, but I don’t get paid again until the fif- much from interest income as from manu- teenth. Once I make my car payment and facturing. It is sometimes regarded as “a pay the late charges, I’ve used up most of bank with an electronics department at- that paycheck. Then come the credit card ...
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...following cash flow streams. The appropriate interest rate is 8% Year Cash Stream A Cash Stream B 1 $100 & nbsp; $300 2 400 400 3 400 400 4 400 400 5 300 100 PV for cash stream A = $1,251.29; PV for cash stream B = $1,300.31 b. What is the value of each cash flow stream at a 0 % interest rate? PV for cash stream A = $1,600; PV for cash stream B = $1,600 Question 2. If a typical firm reports $20 million of retained earnings on its balance sheet, could its directors declare a $20 million cash dividend without any qualms whatsoever? No, because the $20 million of retained earnings would probably not be held as cash. The retained earnings figure represents the reinvestment of earnings by the firm. Consequently, the $20 million would be an investment in all of the firm’s assets. Question 3. The Menendez Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $1.5 million. All sales revenue will be collected in cash, and cost other than depreciation must be paid for during the year. Menendez federal-plus-state tax rate is 40%. a. Set up an income statement. What is Menendez’s...
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...Questions 1. (a) What is a statement of cash flows? The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances (b) Mark Paxson maintains that the statement of cash flows is an optional financial statement. Do you agree? Explain. Disagree. The statement of cash flows is required. It is the fourth basic financial statement. 2. What questions about cash are answered by the statement of cash flows? The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What was the cash used for during the period? and (c) What was the change in the cash balance during the period? 3. Distinguish among the three activities reported in the statement of cash flows. Operating activities include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income. Investing activities include: (a) purchasing and disposing of investments and productive long-lived assets and (b) lending money and collecting loans. Financing activities include: (a) obtaining cash from issuing debt and repaying amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying them dividends. 4. (a) What are the sources (inflows) of cash in a statement of cash flows? Major sources...
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...balance sheet for Cornell Corp. based on the following information: cash = $143,000; patents and copyrights = $630,000; accounts payable = $220,500; accounts receivable = $115,000; tangible net fixed assets = $1,660,000; inventory = $301,000; notes payable = $120,000; accumulated retained earnings = $1,246,000; long-term debt = $861,000. (Be sure to list the accounts in order of their liquidity.) CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory Current assets Tangible net fixed assets Intangible net fixed assets Total assets Liabilities Accounts payable Notes payable Current liabilities Long-term debt Total liabilities Common stock Accumulated retained earnings Total liabilities & owners' equity $ 220,500 120,000 $ 340,500 861,000 $ 1,201,500 401,500 1,246,000 $ 2,849,000 $ 143,000 115,000 301,000 $ 559,000 1,660,000 630,000 $ 2,849,000 Worksheet Learning Objective: 02-01 The difference between accounting value (or “book” value) and market value. Prepare a 2011 balance sheet for Cornell Corp. based on the following information: cash = $143,000; patents and copyrights = $630,000; accounts payable = $220,500; accounts receivable = $115,000; tangible net fixed assets = $1,660,000; inventory = $301,000; notes payable = $120,000; accumulated retained earnings = $1,246,000; long-term debt = $861,000. (Be sure to list the accounts in order of their liquidity.) CORNELL COP. Balance Sheet Assets Cash Accounts receivable Inventory Current assets Tangible net fixed...
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...Statements and Cash Flow 2 LO 1 LO 2 LO 3 LO 4 Financial Statements, Taxes, and Cash Flow W hen a company announces a “write-off,” it frequently means that the value of the company’s assets has declined. AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO: Differentiate between accounting value (or “book” value) and market value. Distinguish accounting income from cash flow. Explain the difference between average and marginal tax rates. Determine a firm’s cash flow from its financial statements. For example, in the first quarter of 2009, luxury homebuilder Toll Brothers said it was writing down $157 million in assets, much of which was a reflection of the reduced value of land the company owned. Of course, Toll Brothers was not the only homebuilder suffering. Hovnanian Enterprises announced it would take a $132 million write-off, and Centex Corp. announced a $590 million writeoff. At the same time, D. R. Horton, the largest homebuilder by volume, had a much smaller write-off of only $56 million. However, D. R. Horton had already written off $1.15 billion in the fourth quarter of 2008. So did stockholders in these homebuilders lose hundreds of millions of dollars (or more) because of the write-offs? The answer is probably not. Understanding why ultimately leads us to the main subject of this chapter: that all important substance known as cash flow. Visit us at www.mhhe.com/rwj I 22 n this chapter, we examine financial statements, taxes, and cash flow. Our emphasis...
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...on the January through June 2010 cash budget, what is the maximum monthly loss during the six-month planning period? What is the maximum cumulative borrowing balance? (For purposes of this question, disregard any interest payments on short-term bank loans or interest received from investing surplus funds.) Maximum monthly loss is in June: -$60,750. The maximum cumulative borrowing balance is $99,000 in February. What does the monthly cash budget reveal that indicates it should probably be extended beyond the original six months’ horizon? The major cash shortfall in June and the seasonality inherent in the firm’s business indicate that a full year’s cash budget should be developed. The monthly cash budget assumes that cash flows occur simultaneously. This is not realistic, of course. Assume, more realistically, that cash outflows occur early in the month and cash inflows occur later in the month. What do you think would happen to the current cash budget’s predictive powers? (NOTE: This question should be answered without preparing a spreadsheet; it is a ‘thought’ question.) The monthly cash budget would understate the need for funds, since outflows would occur before inflows. If you identified any issues in #3 above, what do you think would resolve them? HINT: There is a specific answer I am expecting, short and sweet, and it is in the case study narrative. Use a daily cash budget to predict cash flows. The need for cash could then be more precisely forecasted...
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...be obtained. Assessment of assets is important to its creditors and to its owners because assets provide a basis for judging whether the company has sufficient resources available to operate the business. Typically, the assets of a company include the following: 1. Current assets (short-term): short term assets that transform into cash and within the next year or the operating business cycle of the company. a. Cash and cash equivalents: Highly liquid assets, that can be easily convertible to cash such as bonds, marketable securities. b. Short-term investments: represents the reported values of shares of other companies as investment of access cash c. Trade receivables: When a company sells it products on credit, and receives promises to get back. d. Inventories: refers to the goods which used to produced products and services on credit. e. Prepayments: Prepayments are the advanced payment of any insurance premiums that reflect future economic benefits. f. Other current assets 2. Non-current assets (long-term) : are considered to be long term because they will be used or turned into cash over...
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...FI504 Case Study 3 on Cash Budgeting Requirements: 1. Use this information to prepare a Cash Budget for the months of August and September, using the template provided in Doc Sharing. Excel Spreadsheet 2. What are the three sections of a Cash Budget, and what is included in each section? The cash budget is separated into three sections: cash receipts, cash disbursements, and financing (Cenar, 2009). The first section, cash receipts, is exactly what the name implies, which is the cash expected to be received for goods or services rendered by the company. Because it is driven mostly by sales, cash is not just the physical dollar amounts being received by the company but also includes interest and dividends as well as planned sales of assets like stock or inventory or plant sales (Parry, 2006). The second section is cash disbursements, which just means payments for expenses that the company incurs to do business (DeThomas, 1980). Examples of these payments would be labor costs, raw materials cost, and income taxes (DeThomas, 1980). Anything that is used or will be used to maintain operations or production for the company would be put into this category of the cash budget. Finally, the financing section is where any money borrowed from investors, banks, and other financial sources can be located (Cenar, 2009). This section shows borrowing and repayment of that borrowed money, and is necessary to utilize as a guide against cash deficiency (Cenar, 2009)...
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...1. Use this information to prepare a Cash Budget for the months of August and September, using the template provided in Doc Sharing. Excel Spreadsheet 2. What are the three sections of a Cash Budget, and what is included in each section? The cash budget is separated into three sections: cash receipts, cash disbursements, and financing (Cenar, 2009). The first section, cash receipts, is exactly what the name implies, which is the cash expected to be received for goods or services rendered by the company. Because it is driven mostly by sales, cash is not just the physical dollar amounts being received by the company but also includes interest and dividends as well as planned sales of assets like stock or inventory or plant sales (Parry, 2006). The second section is cash disbursements, which just means payments for expenses that the company incurs to do business (DeThomas, 1980). Examples of these payments would be labor costs, raw materials cost, and income taxes (DeThomas, 1980). Anything that is used or will be used to maintain operations or production for the company would be put into this category of the cash budget. Finally, the financing section is where any money borrowed from investors, banks, and other financial sources can be located (Cenar, 2009). This section shows borrowing and repayment of that borrowed money, and is necessary to utilize as a guide against cash deficiency (Cenar, 2009). The company must have a certain balance minimum in the budget to make...
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...in which you answer the following questions: What does the income statement tell you about the company? Why is this statement important? What business decisions could be made using the income statement? What does the balance sheet tell you about the company? Why is the balance sheet important? What business decisions could be made using the balance sheet? What does the statement of cash flows tell you about the company? What business decisions could be made using the statement of cash flows? What information is provided in the statements that will assist you in making these business decisions? What information is not provided that could assist in managerial decision making? Financial Statements Paper Part II Using Home Depot, Inc. 2008 Annual Report located in Appendix A of the text, Fundamentals of Financial Accounting, prepare a 1,050-1,750-word paper in which you address the following items: Does management’s assessment of the financial condition agree with your assessment from the Financial Statements Paper Part I? Explain. Support your answer using trend analysis, vertical analysis, and ratio analysis. In the Annual Report, there are several concerns from management. Discuss these concerns, and identify other weaknesses not discussed by management. Then, recommend a course of action addressing these concerns What does the income statement tell you about the company? Why is this statement important? What business decisions could be made using the income...
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...Question and Answer: 16. List the amount of cash flows from each of the 3 activities: Operating, Investing, and Financing for the 2 most recent years. What was the increase or decrease in cash for each of these years? Answer: $ Million | 2012 | 2011 | Operating | 50,856 | 37,529 | Investing | (48,227) | (40,419) | Financing | (1,698) | 1,444 | Change in cash | 931 | (1,446) | 17.Were there any Non-Cash Investing/Financing Transactions? Describe the type and amount. Answer: No, there were no Non-Cash Investing/ Financing Transactions 18.What is the dollar difference between accrual net income and Cash provided by Operations? Answer: Accrual Net Income = $ 41,733 million Cash provided by operations = $ 50,856 million Difference = $9,123 million 19.What investing activity provided the largest inflow of cash in the current year? Answer: Proceeds from sale of marketable securities 20.What investing activity used the largest amount of cash in the current year? Answer: Purchase of marketable securities 21.What financing activity provided the largest inflow of cash in the current year? Answer: Excess tax benefits 22.What financing activity used the largest amount of cash in the current year? Answer: Dividends 23.Does the company have sufficient cash inflows from the appropriate category? Describe any problems the company many experience with cash flow from your analysis of the cash flow statement. Answer: 24.Show the change in...
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...THE MINISTRY OF EDUCATION AND SCIENCE OF THE REPUBLIC OF KAZAKHSTAN INTERNATIONAL ACADEMY OF BUSINESS DEPARTMENT «FINANCE » APPROVAL First vice-rector, Vice-rector on academic affairs ______________ Nussenov Zh. M. ______________________ 2011 y. Control materials on discipline «Financial asset management» (specialization: 050509 - Finance) Course: 4 Semester: 7 Form of study: full time Amount of credits: 2 Lectures: 15 hours Practice classes: 15 hours IWST: 30 hours IWS: 60 hours Almaty, 2011 The Working Program has been completed by d.ec.sc., professor IAB Zh. M.Yelubayeva Working Program is made on Elective Courses’ Catalog ” Financial asset management” for the students of the specialty 050509 – Finance Working Program discussed on the department’s meeting ”Finance” from « 03 » September 2011, reference № 1 . Chief of Department, D.e.sc., Professor _____________________ P. B. Isakhova Working Program approved on the EMC of HPE Department from «____»_____________2011 , reference №______. Course description: The purpose of course Provides understanding of the finance function and the responsibilities of the financial manager. Develops concepts and tools for use in effective financial decision making and problem solving. Covers ratio analysis, funds, flow, forecasting, current assets management, budgeting, credit services, formation and cost of capital and impact of operating and financial leverages. The tasks...
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...following cash flow streams. The appropriate interest rate is 8% Year Cash Stream A Cash Stream B 1 $100 & nbsp; $300 2 400 400 3 400 400 4 400 400 5 300 100 PV for cash stream A = $1,251.29; PV for cash stream B = $1,300.31 b. What is the value of each cash flow stream at a 0 % interest rate? PV for cash stream A = $1,600; PV for cash stream B = $1,600 Question 2. If a typical firm reports $20 million of retained earnings on its balance sheet, could its directors declare a $20 million cash dividend without any qualms whatsoever? No, because the $20 million of retained earnings would probably not be held as cash. The retained earnings figure represents the reinvestment of earnings by the firm. Consequently, the $20 million would be an investment in all of the firm’s assets. Question 3. The Menendez Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $1.5 million. All sales revenue will be collected in cash, and cost other than depreciation must be paid for during the year. Menendez federal-plus-state tax rate is 40%. a. Set up an income statement. What is Menendez’s...
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...What items are included in operating activities on the Statement of Cash Flows? Cash received from Customers, Interest & Dividends, Trading Securities Cash paid to Vendors, Suppliers, Interest, Taxes, Trading Securities What items are included in investing activities on a Statement of Cash Flows? Cash received: Sale of PP&E, Sale of Investments, Loan Principle Cash paid: Loans, Acquisitions, AFS or HTM Securities, Taxes, Trading Securities What items are included in Financing Activities in a Statement of Cash Flows? Cash received: Issuance of Stock, Issuance of Debt Cash paid: Dividends What is the direct method for a Statement of Cash Flows? Starts with Income from Continuing Operations Adjusts for changes in accounts like A/R, A/P, Inventory and non-cash revenues, expenses, gains, losses If used, the Indirect Method must also be shown What is the Indirect Method for a Statement of Cash Flows? Starts with Net Income Adjusts for changes in accounts like A/R, A/P, Inventory and non-cash revenues, expenses, gains, losses What is the primary purpose of statement of cash flows? To provide relevant information about the enterprise's cash receipts and cash payments during a period Is the purchase of cash equivalent using cash reported on the statement of cash flows? No - purchase of cash equivalent using cash is NOT an outflow of cash and therefore does not get reported on Statement of cash flows. Where would the collection...
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