Assets = Liabilities + Owner's Equity

(Cash/Non-Cash)=(Current/LT Liab.) + (Contrib. Capital/Earned Capital) <Retained Earnings which comes from Income Statement>

Also seen in the notes as:

Investing = Nonowner Financing + Owner Financing

What are the 3 Main Financial Statements?

(and a 4th semi-important statement)

1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows

4. Statement of Stockholder's Equity

Beginning Retained Earnings

+ Net Income

- Dividends

__________________________

End Retained Earnings

The ________________________ contains three seperate distinct sections for:

The Statement of Cash Flows

1. Operating
2. Financing
3. Investing

Inventory Turnover = COGS/Average Inventory

Average Inventory is calculated using all previous inventory amounts

______Cost - Salvage Value      

Estimated Useful Life

Revenues are recognized when earned and expenses are recognized when incurred

(even if not received in cash!!!) 

Accrual accounting (income) does not represent cash transactions.

ex/ A/P, A/R, etc.

also called accruals.

They are not triggered by transactions.

Used to 'adjust' for entries at the end of the period like interest expense, wage expense, etc.

Current Assets

   - Current Liabilities   

Net Working Capital

Preferred Stock

+ Paid-in-capital (common stock)

     - Treasury Stock      

Contributed Capital

Retained Earnings

+ Accumulated other Comprehensive income (loss)

Total Earned Capital

Net Sales

- Cost of Goods Sold

Gross Profit

Sales

- sales discounts, returns and allowances

Net Sales

1. Investing
2. Operations
3. Financing

Net Cash Flows from Operating Activies relate to...

1. ______________

2. ______________

3. ______________

4._______________

1. the income statement
2. current assets
3. current liabilities
4. Depreciation and Amortization add back

Net cash flows from investing activities relate to...

1.____________________________________

2.____________________________________

1. the balance sheet's long-term assets
2. change in all investment accounts (current and long term)

Net cash flows from financing activities relate to...

1. ____________________...

a.  ___________

b. ___________

1. the balance sheet's              

a. long-term liabilities    

b. stockholder's equity  (excluding net income in operations)

revenues are recognized when EARNED,

and expenses are are recognize when INCURRED!

When computing net cash flows, you...

• ___ depreciation expense           
• ___ increases in current assets   
• ___ decreases in current assets  
• ___ increases in current liabilities
• ___ decreases in current liabilities
• 
  

ADD depreciation expense

SUBTRACT increase in current assets

ADD decreases in current assets

ADD increases in current liabilities

SUBTRACCT decreases in current liabilities

In accrual accounting, when calculating net income, in order to accurately record cash flows, we must...

______ increase in receivables from net income

______   decrease in receivables to net income

______ increase in inventories from net income

______    decrease in inventories to net income

_____ increase in payables and accruals to net income

_____decrease in payables and accruals from net income

SUBTRACT increase in receivables

ADD decrease in receivables

SUBTRACT increase in inventories

ADD decrease in inventories

ADD increase in payables/accruals

SUBTRACT decrease in payables/accruals

1. Dividends received in Operations
2. Dividends paid in Financing
3. Interest income in Operations
4. Interest paid in Operations

Cash Flow from Operations

     - Capital Expenditure     

Free Cash Flow

Net Income

______________

Average Total Assets

Face Value 

____________

(1 + r)^t

or FV * (1/(1+r)^t

Sales

_______

Average Accounts Receivable

Raw Materials

+Work in Process

+ Finished Goods

Beginning Inventory

  __ + Purchases_____

-------------[BLANK]--------------

- Ending Inventory 

_______________

[BLANK]

Cost of Goods Available for Sale

COGS

1) Is market value of investment less than the investment balance? YES = impaired

2) Goodwill account is written down to market value as impairment

Fair value of company

-Fair value of net assets

Implied goodwill

Existing Goodwill

-Implied goodwill

Impairment charge to Goodwill

• Assets, Liabilities and Stockholder's Equity
• Point in time
• Reports Financing and Investing activities
• Based on accounting equation: A = L + OE

• Includes Revenues, Expenses and Net Income
• Reports on Operating Activites
• Period of time

• Shows cash transactions as related to operations, financing and investing
• Period of Time

• Changes in all equity accounts over a period of time