Resources or claims to resources that are expected to be sold, collected, or used within one year or the operating cycle, whichever is longer.. Resources or claims to resources tha[r]
(1)Copyright © 2009 by The McGraw-Hill Companies, Inc All rights reserved. McGraw-Hill/Irwin
Statement Analysis
(2)3&4 CHAPTER
(3)Balance Sheet
Express an entity’s financial position at a point in
time in terms of:
(4)Purposes of Balance sheet
To help users answer:
Does the company have enough assets to pay debts ?
What is the company’s value ?
(5)ASSETS
“Resourses controlled by a company for the
purpose of generating profit”
Classification based on the convertibility to cash Current (Short-term) assets
(6)Current (Short-term) Assets
Current (Short-term)
Assets Noncurrent (Long-term) Assets Noncurrent
(Long-term) Assets
Resources or claims to resources that are expected to be sold, collected, or used within one year or the operating cycle, whichever is longer
Resources or claims to resources that are expected to be sold, collected, or used within
one year or the operating cycle, whichever is longer
Resources or claims to resources that are
expected to yield benefits that extend beyond one
year or the operating cycle, whichever is
longer
Resources or claims to resources that are
expected to yield benefits that extend beyond one
year or the operating cycle, whichever is
longer
(7)Current assets
• Cash & cash equivalents • Marketable securities
• Receivables • Inventories
• Prepaid expenses
(8)Three step process:
(1) Reported LIFO Inventory + LIFO reserve
(2) Deferred tax payable + [LIFO reserve x Tax rate] (3) Retained earnings + [LIFO reserve x (1-Tax rate)]
LIFO reserve is the amount by which current cost exceeds reported cost of LIFO
inventories
Three step process:
(1) Reported LIFO Inventory + LIFO reserve
(2) Deferred tax payable + [LIFO reserve x Tax rate]
(3) Retained earnings + [LIFO reserve x (1-Tax rate)]
LIFO reserve is the amount by which current cost exceeds reported cost of LIFO
inventories
(9)Illustration 4.2 (page 233)
Campbell’s Soup reports “adjustments of inventories to LIFO basis” (the LIFO reserve) are $89.6m in year 11 and $84.6m in year 10 The income tax rate is 34% Restate Campbell’s financial statements from LIFO to FIFO
Illustration 4.2 (page 233)
Campbell’s Soup reports “adjustments of inventories to LIFO basis” (the LIFO reserve) are $89.6m in year 11 and $84.6m in year 10 The income tax rate is 34% Restate Campbell’s financial statements from LIFO to FIFO
(10)Long-term assets
Investments
Tangible fixed assets (Property, plant & Equipments)
Intangible assets (i.e patents, copyrights, trademarks, goodwill)
Financial leases Deffered charges
(11)LIABILITIES
• “an obligation of an entity arising
from past transactions or events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic
benefits
• Classification based on time of payment
(12)EQUITY
“the claims of owners on the net assets of the
company (ownership in total assets after all liabilities associated are paid off).”
Including:
Common stock / Preferred stock
Paid-in capital (Additional paid-in capital or
contributed capital)
(13)WHO IS WHO?