LiabilitiesandEquity.pptx

Balance sheet Income statement Statement of cash flows Accounting income vs. cash flow MVA and EVA Personal taxes Corporate taxes,CHAPTER 2 Financial Statements, Cash Flow,and Taxes,Balance Sheet: Assets,Cash,7,282,57,600,AR,632,160,351,200,Inventories,1,287,360,715,200,Total CA,1,926,802,1,124,000,Gross FA,1,202,950,491,000,Less: Deprec.,263,160,146,200,Net FA,939,790,344,800,Total Assets,2,866,592,1,468,800,2000,1999,Liabilities and Equity,2000,1999,Accts payable,524,160,145,600,Notes payable,720,000,200,000,Accruals,489,600,136,000,Total CL,1,733,760,481,600,Long-term debt,1,000,000,323,432,Common stock,460,000,460,000,Retained earnings,(327,168),203,768,Total equity,132,832,663,768,Total L&E,2,866,592,1,468,800,Income Statement,Sales,5,834,400,3,432,000,COGS,5,728,000,2,864,000,Other expenses,680,000,340,000,EBITDA,(573,600),228,000,Depr. & Amort.,116,960,18,900,EBIT,(690,560),209,100,Interest exp.,176,000,62,500,EBT,(866,560),146,600,Taxes (40%),(346,624),58,640,Net income,(519,936),87,960,2000,1999,Other Data,No. of shares,100,000,100,000,EPS,($5.199),$0.88,DPS,$0.110,$0.22,Stock price,$2.25,$8.50,Lease pmts,$40,000,$40,000,2000,1999,Statement of Retained Earnings (2000),Balance of retained earnings, 12/31/99$203,768 Add: Net income, 2000(519,936) Less: Dividends paid(11,000) Balance of retained earnings, 12/31/00($327,168),(523,936),Statement of Cash Flows (2000),OPERATING ACTIVITIES,Net income,(519,936),Add (Sources of cash):,Depreciation,116,960,Increase in A/P,378,560,Increase in accruals,353,600,Subtract (Uses of cash):,Increase in A/R,(280,960),Increase in inventories,(572,160),Net cash provided by ops.,L-T INVESTING ACTIVITIES,Investment in fixed assets,(711,950),FINANCING ACTIVITIES,Increase in notes payable,520,000,Increase in long-term debt,676,568,Payment of cash dividends,(11,000),Net cash from financing,1,185,568,NET CHANGE IN CASH,(50,318),Plus: Cash at beginning of year,57,600,Cash at end of year,7,282,Net cash from operations = -$523,936, mainly because of negative NI. The firm borrowed $1,185,568 to meet its cash requirements. Even after borrowing, the cash account fell by $50,318.,What can you conclude about DLeons financial condition from its statement of CFs?,Did the expansion create additional net operating profit after taxes (NOPAT)?,NOPAT = EBIT(1 Tax rate) NOPAT00= -$690,560(1 0.4) = -$690,560(0.6) = -$414,336. NOPAT99= $125,460.,What effect did the expansion have on net operating working capital (NOWC)?,NOWC,= ,Current assets,Non-interest bearing CL,NOWC00 = ($7,282 + $632,160 + $1,287,360) ($524,160 + $489,600) = $913,042. NOWC99 = $842,400.,What effect did the expansion have on capital used in operations?,Operating capital,= NOWC + Net fixed assets. = $913,042 + $939,790 = $1,852,832. = $1,187,200.,Operating capital00,Operating capital99,What is your initial assessment of the expansions effect on operations?,2000 1999 Sales$5,834,400 $3,432,000 NOPAT($414,336)$125,460 NOWC $913,042 $842,400 Operating capital $1,852,832 $1,187,200 Net Income ($519,936) $87,960,What effect did the companys expansion have on its net cash flow and operating cash flow?,NCF00= NI + DEP= ($519,936) + $116,960 = ($402,976).,NCF99= $87,960 + $18,900 = $106,860.,OCF00= NOPAT + DEP = ($414,336) + $116,960 = ($297,376).,OCF99= $125,460 + $18,900 = $144,360.,What was the free cash flow (FCF) for 2000?,FCF = NOPAT Net capital investment = -$414,336 ($1,852,832 $1,187,200) = -$414,336 $665,632 = -$1,079,968. Is negative free cash flow always a bad sign?,Economic Value Added (EVA),EVA= = = NOPAT After-Tax Cost of Capital,Operating IncomeAfter Tax,After-TaxCapital Costs,Funds Availableto Investors,Cost ofCapital Used,In order to generate positive EVA, a firm has to more than just cover operating costs. It must also provide a return to those who have provided the firm with capital. EVA takes into account the total cost of capital, which includes the cost of equity.,EVA Concepts,What is the companys EVA? Assume the firms after-tax cost of capital was 11% in 1999 and 13% in 2000.,EVA00= NOPAT (A-T cost of capital)(Capital) = -$414,336 (0.13)($1,852,832) = -$414,336 $240,868 = -$655,204.,EVA99= $125,460 (0.11)($1,187,200) = $125,460 $130,592 = -$5,132.,Would you conclude that the expansion increased or decreased MVA?,MVA = ,Market value of equity,Equity capital supplied,During the last year stock price has decreased 73%, so market value of equity has declined. Consequently, MVA has declined.,CompanyMarket Value Added Microsoft $328,257 million General Electric $285,320 million Intel $166,902 million Wal-Mart Stores $159,444 million Coca-Cola $157,536 million Merck $153,170 million Pfizer $148,245 million Cisco Systems $135,650 million Lucent Technologies $127,265 million Bristol-Myers Squibb $119,350 million,Leading Creators of Wealth in the U. S. Market Value Added in 1999,Probably not. A/P increased 260% over the past year, while sales increased by only 70%. If this continues, suppliers may cut off DLeons tra。