FIN 345 1nd Edition Lecture 10Outline of Current LectureChapter 71. 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 prospectsb. Statement of Retained earningsc. Statement of Cash Flowsd. 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)These 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.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 account2. How do investors use financial statements?3. Sources and Uses of Casha. If Assets Increase = Use of Cashb. If Assets Decrease = Source of Cashc. If Liabilities Increase = Source of Cashd. If Liabilities Decrease = Use of
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