CH02Financial Statements, Cash Flow,and Taxes(财务管理,英文版).ppt

Balance sheet Income statement Statement of cash flows Accounting income vs. cash flow MVA and EVA Personal taxes Corporate taxes 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. 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? Probably not. A/P increased 260% over the past year, while sales increased by only 70%. If this continues, suppliers may cut off D’Leon’s trade credit. No, the negative NOPAT and decline in cash position shows that D’Leon is spending more on its operations than it is taking in. Short run: Inventory and fixed assets é to meet increased sales. A/R é , Cash ê. Company may have to seek additional financing. Long-run: Collections increase and the company’s cash position would improve. D’Leon financed its expansion with external capital. D’Leon issued long-term debt which reduced its financial strength and flexibility. Would D’Leon have required external capital if they had broken even in 2000 (Net Income = 0)? YES, the company would still have to finance its increase in assets. What happens if D’Leon depreciates its fixed assets over 7 years (as opposed to the current 10 years)? No effect on physical assets. Fixed assets on balance sheet would decline. Net income would decline. Tax payments would decline. Cash position would improve. Other policies that affect financial statements Inventory valuation methods. Capitalization of R&D expenses. Policies for funding the company’s retirement plan. Does the company’s positive stock price ($2.25), in the face of large losses, suggest that investors are irrational? NO, it means that investors expect things to get better in the future. Why did the stock fall after the dividend was cut? Management was “signaling” that the firm’s opera