FIN 345 1st Edition Lecture 8Outline of Current Lecture1. Financial Statements and Reportsa. Annual Reporti. A report issued annually by a corporation to its stockholdersii. Management’s opinion of the past year’s operations and the firm’s future prospectsiii. Basic financial statements included in the annual report are:1. Balance sheet: a statement of the firms financial position at a specific point in timea. Cash versus other assetsb. Accounting alternativesi. FIFO (first in first out) LIFO (last in first out)ii. Accelerated or straight-line depreciationc. Breakdown of common equity accounti. Common stock, paid-in capital, retained earningsd. Stock reported at “book values” versus market valuese. The time dimension2. Income statement: a statement summarizing the firm’s revenues and expenses over an accounting period, generally a quarter or ayear3. Statement of retained earnings: a statement reporting changes in the firms retained earnings as a result of the income generated and retained during the yeara. The balance sheet figure for retained earnings is the sum of the earnings retained for each year the firm has been in business (not paid out stockholders)4. Statement of cash flows: a statement reporting the impact of a firm’s operating, investing, and financing activities on cash flows over an accounting period.a. Sources of cashi. Increase liability or equity accountii. Decrease in an asset accountb. Uses of cashi. Decrease in a liability or equity accountii. Increase in an asset accountb. Accounting income versus cash flowThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Cash flows1. The cash receipts and the cash disbursements, as opposed to therevenues and expenses reported for computation of net income, generated by a firm during some specified period2. Accrual accountingii. Accounting profit: a firms net income as reported on its income statementiii. Operating cash flows: those cash flows that arise from normal operations; the difference between cash collections and cash
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