Financial Statement and Cash Flow Analysis

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Chapters 3 and 13 Financial Statement and Cash Flow Analysis Balance Sheet Assets Cash Inventory Accounts Receivable Property Plant Equipment Liabilities and Shareholder’s Equity Accounts Payable Notes Payable Accrued Wages Bank Loans Bonds Common Stock Retained Earnings Total Liabilities and Shareholder’s Equity

Total Assets Income Statement

Used to figure out how much money we are earning for: (a) (b) (c) (d) vendors, employees, etc - Cost of Goods Sold, Operating Expenses lenders, bondholders - Interest, government - Taxes, owners/stockholders - Dividends/Retained Earnings Sales (-) Cost of Goods Sold (-) Operating Expenses (-) Depreciation EBIT (-) Interest EBT (-) Taxes Net Income (-) Dividends Additions to R/E revenues cost to manufacture product general expenses expensing fixed assets earnings before int. and taxes to bondholders earnings before taxes rate set by government payout or retain payout retain

Statement of Cash Flows Cash Flow from Operations: Net income (I/S) + depreciation (I/S) - increases in current assets (B/S) + increases in current liabilities (B/S) Cash Flow from Investments: - investments in PPE (B/S) + sale of assets (B/S) Cash Flow from Financing: + proceeds from issues of common stock or debt (B/S) - payment of dividends (I/S) - repurchase of common stock (B/S) - repayment of debt (B/S) Net increase/decrease in Cash Account MicroDrive, Inc: Balance Sheet (millions of dollars) Assets Cash and equivalents ST investments Accounts receivable Inventories Total current assets Gross plant and equip Accumulate Depr Net plant and equip 2008 $10 0 375 615 $1,000 1,400 -400 $1,000 2007 $15 65 315 415 $810 1,230 Liabilities and Equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Total liabilities 2008 $60 110 140 $310 754 $1,064 40 130 766 $896 $2,000 2007 $30 60 130 $220 580 $800 40 130 710 $840 $1,680

-360 Preferred stock (400k shr) $870 Common stock (50m shr) Retained earnings Total common equity

Total assets

$2,000

$1,680

Liabilities and Equity

footnote - lease payments for 2007 were $42,000,000, and for 2008 were $45,000,000

MicroDrive, Inc: Income Statement (millions of dollars)
2008 Net sales Cost of goods sold Administration expenses Earnings before int., taxes, depr., amort., (EBITDA) Depreciation Amortization Earnings before int. and taxes (EBIT) Less: Interest Earnings before taxes (EBT) Taxes (40%) Net income before preferred dividends Preferred dividends Net income Common dividends Additions to retained earnings Calculations of EPS, DPS, BVPS, and CFPS for 2008 (based on 50,000 shares outstanding) Earnings per share = EPS = Net income Common shares O/S = $113,500,000 50,000,000 $57,500,000 50,000,000 = = = = $2.27 $1.15 $17.92 $4.27 $3,000.0 1,284.5 1,331.7 $383.8 100.0 0.0 $283.8 88.0 $195.8 78.3 $117.5 4.0 $113.5 $57.5 $56.0 2007 $2,850.0 1,211.6 1,285.4 $353.0 90.0 0.0 $263.0 60.0 $203.0 81.2 $121.8 4.0 $117.8 $53.0 $64.8

Dividends per share = DPS = Book value per share = BVPS = Cash Flow per share = CFPS =

Dividends to C/S = Common shares O/S Total common equity Common shares O/S NI + Depr + Amort Common shares O/S

$896,000,000 = 50,000,000 $213,500,000 = 50,000,000

Stock Price = $23.80 Average analysts expected growth forecast for EPS is 7% per year

MicroDrive, Inc: Statement of Retained Earnings (millions of dollars) Balance of retained earnings, 12/31/07 Add: Net income, 2008 Less: Dividends to common stockholders Balance of retained earnings, 12/31/08 MicroDrive, Inc: Statement of Cash Flows (millions of dollars) Cash provided or uses Operating Activities Net income before preferred dividends Adjustments Noncash adjustments Depreciation Due to changes in working capital Increase in accounts receivable Increase in inventories Increase in accounts payable Increase in accurals Net cash provided by operating activities Long-Term Investing Activities Cash used to acquire fixed assets Financing Activities...
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