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P.V. Viswanath
P.V. Viswanath
Chapter Outline
The Balance Sheet
The Income Statement
Taxes
Cash Flow
P.V. Viswanath
P.V. Viswanath
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Fixed Assets
Tangible Assets
Intangible Assets
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Current Liabilities
Payables
Short-term Debt
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Long-term Liabilities
+
Shareholders Equity
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28-Dec-02
1,638
207
2,531
1,342
695
6,413
2,611
7,390
3,631
1,588
1,841
23,474
29-Dec-01 Liabilities
28-Dec-02 29-Dec-01
6,052
4,998
Current Liabilities
683
Accounts Payable
5,490
3,484
966
562
354
Short/Current LongTermDebt
2,142
Other Current Liabilities
-
1,160
1,310 Total Current Liabilities
6,052
4,998
752 LongTermDebt
2,187
2,651
5,853 Other long-termliabilities
5,937
5,398
2,871 Total Liabilities
14,176
13,021
6,876 CommonStock &Other Paid-upCapital
30
43
3,374 RetainedEarnings
9,268
8,605
1,467 Total Stockholder Equity
9,298
8,674
1,254
21,695 Tot Liabs & Shareholders' Equity 23,474
21,695
P.V. Viswanath
P.V. Viswanath
P.V. Viswanath
Income Statement
The income statement is more like a video of
the firms operations for a specified period of
time.
You generally report revenues first and then
deduct any expenses for the period
Matching principle GAAP say to show
revenue when it accrues and match the
expenses required to generate the revenue
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Income Statement
Pepsico Inc. (in mil. $)
Income Statement
Dec 02
Dec 01
Revenue
25,112.00 26,935.00
10,523.00
Gross Profit
14,589.00 17,098.00
9,837.00
SG&A Expense
8,523.00 11,608.00
1,112.00
1,082.00
Operating Income
4,954.00
4,408.00
Nonoperating Income
316
227
Nonoperating Expenses
178
219
4,868.00
4,029.00
Income Taxes
1,555.00
1,367.00
3,313.00
2,662.00
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Taxes
Marginal vs. average tax rates
Income before taxes was $4868 and $4029 and taxes were
$1555 and $1367 for 2002 and 2001 resp. (in mil. $)
The average tax rates were 31.94% and 33.93%.
However, the tax paid on an additional dollar of income in
either year would have been 35%, considering that in 2002,
any income over $18 mil. was taxed at a rate of 35%.
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Statement of Cashflows
A firms cashflows can be quite different from its
net income. For example:
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Operations
Investments and
Financing
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Current Assets
Current Liabilities
Fixed Assets
Net Capital
Spending
Liabilities
CF to
Debtholders
Debt
Interest
CF to
Stockholders
Equity
Paid-in capital
Dividends
Retained Earnings
Operating
Cashflow
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Income Statement
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Example: US Corporation
Balance Sheet Information
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US Corporation
Income Statement Information
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Cashflow to Stockholders/Creditors
CF to Creditors (B/S and I/S) = interest paid net new
borrowing = $24
CF to Stockholders (B/S and I/S) = dividends paid net new
equity raised = $63
CFFA = 24 + 63 = $87
As we saw before, this is the same amount that we
computed for Cashflow from Assets
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Quick Quiz
What is the difference between book value and market
value? Which should we use for decision making purposes?
What is the difference between accounting income and cash
flow? Which do we need to use when making decisions?
What is the difference between average and marginal tax
rates? Which should we use when making financial
decisions?
How do we determine a firms cash flows? What are the
equations and where do we find the information?
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