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Professor XXXXX Course Name / Number

Financial Statements And Cash Flow Analysis. Professor XXXXX Course Name / Number. Financial Statements. Balance Sheet. Income Statement. Managers and Analysts Use Financial Statement to Conduct: - Cash Flow Analysis - Performance (Ratio) Analysis. Four Key Financial Statements.

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Professor XXXXX Course Name / Number

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  1. Financial Statements And Cash Flow Analysis Professor XXXXX Course Name / Number

  2. Financial Statements Balance Sheet Income Statement Managers and Analysts Use Financial Statement to Conduct: - Cash Flow Analysis - Performance (Ratio) Analysis

  3. Four Key Financial Statements 1. Balance Sheet 2. Income Statement 3. Statement Of Retained Earnings 4. The Statement Of Cash Flows

  4. Staples Balance Sheet($ Thousands)

  5. Staples Liabilities & Stockholders’ Equity ($ Thousands)

  6. Staples Income Statement ($ Thousands)

  7. Decrease in any asset Increase in any liability Net profits after taxes Depreciation and other non-cash charges Sale of stock Increase in any asset Decrease in any liability Net loss Dividends paid Repurchase or retirement of stock The Sources and Uses of Corporate Cash Sources Uses

  8. Staples Statement Of Retained Earnings ($ Thousands)

  9. Staples Statement Of Cash Flows($ Thousands)

  10. Staples Statement Of Cash Flows ($Thousands)

  11. Profit vs. Cash Flow • Profit based on Accrual Accounting • Finance Emphasizes the Importance of Timing • “You Can’t Deposit Net Income, Only Cash” • Timing of Cash Flow Matters • Accrual Accounting May Obscure Timing What are the key measures of cash flow? 11

  12. Key Measures of Cash Flow Cash Flow from Operations • Total Cash Generated Operating Cash Flow • Cash Flow Before Repaying Lenders Free Cash Flow • Cash Flow Firm Could Distribute to Investors 12

  13. Types Of Financial Ratios Liquidity Ratios Activity Ratios Debt Ratios Profitability Ratios Market Ratios

  14. Staples (2004) Office Depot (2004) Liquidity Ratios

  15. Staples (2004) Office Depot (2004) Activity Ratios

  16. Staples (2004) Office Depot (2004) Activity Ratios (Continued)

  17. Staples (2004) Office Depot (2004) Debt Ratios

  18. Staples (2004) Office Depot (2004) Debt Ratios (Continued)

  19. Staples (2004) Office Depot (2004) Profitability Ratios

  20. Staples (2004) Office Depot (2004) Profitability Ratios (Continued)

  21. Staples (2004) Office Depot (2004) Profitability Ratios (Continued)

  22. Staples (2004) Office Depot (2004) Market Ratios

  23. Progressive tax rate schedule • Average tax rate: tax divided by the pretax income • More relevant: marginal tax rate Ordinary income tax • Under existing tax laws, use ordinary income tax rates for capital gain taxes Capital gains tax Corporate Taxes Significant cash outflow

  24. Financial Ratios For Cross-Sectional and Trend Analysis • Cross-Sectional Analysis: Comparing Different Firms’ Financial Ratios at the Same Point in Time • Compared to firms in same industry • Benchmarking - compares a company’s ratio values to those of competitors that company wishes to emulate • Trend Analysis - Performance Evaluation Over Time • Developing trends can be seen using multiyear comparison

  25. Financial Statements and Financial Ratios Balance Sheet Income Statement Liquidity Ratios Activity Ratios Debt Ratios Profitability Ratios Market Ratios

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