Module C Financial Statement Analysis: Investing Activities

Slides:



Advertisements
Similar presentations
MANAGEMENT DECISIONS AND FINANCIAL ACCOUNTING REPORTS
Advertisements

Chapter 3 Working with Financial Statements
Copyright 2003 Prentice Hall Publishing Company1 Chapter 11 Financial Statement Analysis.
ACTG 3110 Chapter 4 The Income Statement and Related Information.
Fin Dr. Menahem Rosenberg1 Financial Statement  The Balance Sheet  The Income Statement  The Statement of Cash Flows  Accounting for Differences.
1 Corporate Finance Interview Prep - Accounting Mark Pacyna / Manoj Ramnani VP’s for Corporate Finance Ross Business School Finance Club.
Financial Statement Analysis
McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Financial Statement Analysis CHAPTER 14.
Finance/Accounting Functional Review. The Finance/Accounting Functions Defined Investment Decision The Allocation and Reallocation of Capital and Resources.
Statement of Cash Flows COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks.
Categories of Cash Flows
1 16. Understanding Accounting & Financial Statements.
Investments in Stocks and Bonds of Other Companies Chapter 23.
1 Statement of Cash Flows Sid Glandon, DBA, CPA Associate Professor of Accounting.
Financial Statement Analysis
Pro Forma Financial Statements
Chapter Thirteen Financial Statement Analysis Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
Essentials of Financial Statement Analysis Revsine/Collins/Johnson/Mittelstaedt: Chapter 5 Copyright © 2009 by The McGraw-Hill Companies, All Rights Reserved.
© 2009 Cengage Learning/South-Western Financial Statement and Cash Flow Analysis Chapter 2.
Parts of a Financial Statement 1.Statement of Income 2.Balance Sheet 3.Statement of Cash Flow 4.Statement of Stockholders’ Equity.
ANALYSIS OF FINANCIAL STATEMENTS Using Ratios Presented by the Arkansas Securities Department.
Historical Performance Analysis Analysts:. 3-Year Compound Average Growth Rates.
Financial Statements And Cash Flow Analysis Professor XXXXX Course Name / Number.
FINANCE BASIC FACTS. Sources of funds Internal Retained profits Sale of assets Using trade credit Investing surplus cash Reducing inventory External Personal.
Reporting and Analyzing Cash Flows Chapter 17. Purposes of the Statement of Cash Flows Designed to fulfill the following: – predict future cash flows.
Using Financial Statement Information Presentations for Chapter 5 by Glenn Owen.
The Statement of Cash Flows Chapter 4 The Statement of Cash Flows Answers u u How Much Cash Was Provided by Operations u u What Amount of Property and.
Intro to Financial Management Understanding Financial Statements and Cash Flows.
Parts of a Financial Statement 1.Statement of Income 2.Balance Sheet 3.Statement of Cash Flow 4.Statement of Stockholders’ Equity.
Intro to Financial Management Evaluating a Firm’s Financial Performance.
Financial Accounting John J. Wild Sixth Edition John J. Wild Sixth Edition McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights.
Financial Statement Analysis. Two Primary Statements Balance Sheet –Snapshot –BV vs MV Income Statement –Period of time.
Unit 5. The purpose of Unit 5 is to define the four basic financial statements and discuss the information presented on each.
Chapter 2 Financial Ratio Analysis. 2-2 Example 2.1 Problem  Rylan Enterprises has 5 million shares outstanding.  The market price per share is $22.
Does Jones Soda Co. have to account for the changes in its cash every year? 1.Yes 2.No.
Module D How External Users Assess Management’s Operating Decisions.
Chapter 2 Introduction to Financial Statement Analysis.
FINANCIAL STATEMENT ANALYSIS. Important Questions Managers, shareholders, creditors and other interested groups seek answers to the following important.
Analyzing Financial Statements
Section 3The Balance Sheet What You’ll Learn  The purpose of a balance sheet.  How to prepare a balance sheet.  How to analyze information on financial.
McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 19 Financial Statement Analysis.
Essentials of Financial Statement Analysis Revsine/Collins/Johnson/Mittelstaedt: Chapter 5 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies,
© 2009 Cengage Learning/South-Western Financial Statement and Cash Flow Analysis Chapter 2.
Net Sales11,912,7-6,3 % Operating profit0,30,7-57,1 % Percentage of net sales2,55,5 Profit before extraordinary items0,30,8-62,5 % Percentage of net sales2,56,5.
Module C Financial Statement Analysis: Investing Activities.
FINANCIAL STATEMENTS FOR A SOLE PROPRIETORSHIP Chapter 9.
McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Financial Statement Analysis CHAPTER 13.
FINANCIAL STATEMENTS.
Pre – MBA Program Accounting Ratios Nov 11, 2012.
Invest Investments – Debt and equity (long-term, short-term)
Historical Performance Analysis
Financial Statement Analysis
Understanding a Firm’s Financial Statements
Company Performance: Cash Flows
Financial Statement Analysis
Chapter 12 Financial Statement Analysis
Statement of Cash Flows
Financial Statement Analysis
Operating Activities – Calculating Cash Flow Amounts (indirect)
© 2015 Cengage Learning. All Rights Reserved.
Financial Analysis Quick ratio: ($22,000+ $41,500)/
Intro to Financial Management
Intro to Financial Management
Statement of Cash Flows
Statement of Cash Flows – Background
Module D How External Users Assess Management’s Operating Decisions
Statement of Cash Flows
Statement of Cash Flows
Ratio Analysis - Overview
Financial Statements: Basic Concepts and Comprehensive Analysis
Presentation transcript:

Module C Financial Statement Analysis: Investing Activities

Topics Review cash flows and other financial statement effects related to investments in debt and equity securities Review cash flows and other financial statement effects related to investments in long-lived operational assets Understand effects of investments on the financial ratios identified in Module A

Learn the balance sheet and income statement [pro forma informal] adjustments made by many financial analysts in the process of analyzing the effects of investments on the profitability and risk of the firm Identify the quality of earnings [pro forma informal] adjustments made by analysts in the area of gains and losses on investment transactions

Review Cash Flows and Other Financial Statement Effects Related to Investments in Debt and Equity Securities Investments in debt and equity securities Statement of cash flows Trading securities viewed as operating activities All other investments viewed as investing activities

Statement of cash flows Dividends on stock investments viewed as operating activities Exception: Dividends on investments accounted for using the equity method do not affect income, but, instead reduce investment. Interest on debt investments viewed as operating activities Unrealized gains/losses on trading securities are noncash revenue; adjust out of net income

Income statement Trading securities: Interest, dividends, and unrealized gains/losses reported in “other gains/losses” section AFS securities: Interest and dividends reported in “other gains/losses” section Equity-level securities: pro-rata share of investee’s net income reported in “other gains/losses” section HTM securities: Effective interest revenue reported in “other gains/losses” section

Statement of comprehensive income Unrealized gains/losses on available-for-sale securities are reported as other comprehensive income

Review Cash Flows and Other Financial Statement Effects Related to Investments in Long-lived Operational Assets Statement of Cash Flows Transactions reported as investing activities

Income statement Affected by depreciation and amortization expense Research and development costs are expensed Interest cost on long-lived construction in process is capitalized Balance Sheet Reports unallocated historical cost

Module A ratios reviewed include Understand Effects of Investments on the Financial Ratios Identified in Module A Module A ratios reviewed include ROA Net profit margin ratio Asset turnover ratio Compared to WHAT?

Short-term liquidity risk Current ratio Quick ratio Long-term solvency risk Operating cash flow to capital expenditures ratio Average age of assets in place

Learn the Balance Sheet and Income Statement Adjustments Made by Many Financial Analysts in the Process of Analyzing the Effects of Investments on the Profitability and Risk of the Firm Persistence of gains/losses and long-lived assets sales and writedowns Discretion in unrealized gains and losses on available-for-sale securities (i.e., gains trading)

End of Module C