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MU ACC 221 - Red Company: Chapters 1 & 2
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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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