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FINE 3010-01 Financial Management

FINE 3010-01 Financial Management. Instructor: Rogério Mazali Lecture 02: 09/14/2011. Agenda. Chapter 3: The Balance Sheet The Income Statement The Statement of Cash Flows Taxes Chapter 4: Summary of Financial Ratios. FINE 3010-01 Instructor: Rogério Mazali. Chapter 3:

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FINE 3010-01 Financial Management

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  1. FINE 3010-01Financial Management Instructor: RogérioMazali Lecture 02: 09/14/2011

  2. Agenda • Chapter 3: • The Balance Sheet • The Income Statement • The Statement of Cash Flows • Taxes • Chapter 4: • Summary of Financial Ratios

  3. FINE 3010-01Instructor: RogérioMazali Chapter 3: Accounting and Finance Fundamentals of Corporate Finance Sixth Edition Richard A. Brealey Stewart C. Myers Alan J. Marcus McGraw Hill/Irwin

  4. The Balance Sheet • Shows: Firm’s assets and liabilities at a particular point in time. • SEC requires: • Annual Report (10-K): detailed, all year data • Quarterly Reports (10-Q): summarized, quarterly data only • Left Hand Side: Assets • Ordered by liquidity • Right Hand Side: Liabilities and Shareholders’ Equity • Ordered by seniority • Consolidated Balance Sheet: Balance Sheet including all controlled firms

  5. The Balance Sheet

  6. The Income Statement Definition Financial statement that shows the revenues, expenses, and net income of a firm over a period of time (from an accounting perspective).

  7. The Income Statement Profits vs. Cash Flow • “Profits” subtract depreciation (a non-cash expense) • “Profits” ignore cash expenditures on new capital (the expense is capitalized) • “Profits” record income and expenses at the time of sales, not when the cash exchanges actually occur • “Profits” do not consider changes in working capital

  8. Example 3.2 (page 64) • Period 1: firm pays $100 to produce goods • Period 2: firm sells goods for $150, but does not collect payment • Period 3: firm receives $150 as payment for goods sold

  9. The Statement of Cash Flows Definition Financial statement that shows the firm’s cash receipts and cash payments over a period of time.

  10. The Statement of Cash Flows • Free Cash Flow (FCF) • Cash available for distribution to investors after firm pays for new investments or additions to working capital FCF = Net Income + taxes depreciation -change in net working capital -capital expenditures

  11. Corporate Tax Rates, 2008 Personal Tax Rates, 2008

  12. FINE 3010-04Instructor: RogérioMazali Chapter 4: Measuring Corporate Performance Fundamentals of Corporate Finance Sixth Edition Richard A. Brealey Stewart C. Myers Alan J. Marcus McGraw Hill/Irwin

  13. Summary of Pepsi’s financial ratios

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