ACC 221 1st Edition Lecture 35Outline of Last Lecture● Section 34: Cash Flow Cont. (2)♦ Financial statemento Investingo Retained earningso Balance sheet♦ Operating + investment - financingo Non cash activity shown as footnoteOutline of Current Lecture - Section 35: Red Company: Chapters 1 & 2 Chapter 1o Income statement and input variableso Balance sheet input variables Chapter 2o Vertical analysis of income statemento Vertical analysis of balance sheeto Horizontal analysis of income statemento Horizontal analysis of balance sheetCurrent Lecture- Section 35: Red Company: Chapters 1 & 2 Chapter 1o Income Statement and input variables Net sales Cost of goods sold percent – helps to determine cost of goods sold- Net sales (value of this variable / 100) = cost of goods sold Interest percent notes payable – helps to determine interest expense- Notes payable long term (value of variable / 100) = interest expense Effective income tax rate percent – helps to determine provision for income taxes- Pre-tax income (value of variable / 100) = provision for income taxeso Balance sheet input variables Number of days’ sales in A/R – helps to determined accounts receivable, net balance. Number of days’ sales in inventory – helps to determine inventory balance Purchase of new equipment Number of days’ purchases in A/P New borrowing (pay off) Number of new shares of stock issuedThese 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. Cash dividends declared ad paid Number of shares of sock bought back Chapter 2 o Vertical analysis of the income statement % Of Net Sales = net income / net sales x 100o Vertical analysis of the balance sheet % Of total = retained earnings/ total liabilities & equityo Horizontal analysis of the income statement Calculate dollar change and percent change for each line of the income statemento Horizontal analysis of the balance sheet Calculate the dollar and percent change for each line of the balance
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