1. Applications Chapter 1 - Applications This lecture is part of Chapter 1: The Basic Financial Statements

2. Today’s Lecture A short review of the three basic financial statements A look at some real financial statements as they can be found on the web A short review of the numerical methods used

3. A short Review What do the three basic financial statements tell us? Income Statement: Whether the company is profitable Balance Sheet: Whether the company is worth something Cash Flow Statement: Whether the company has money to continue its business.

4. A short Review Income Statement Lists Revenues and Expenses like: Sales Interest Royalties Cost of Goods sold Wages Depreciation Interest And gives the net income by summing things up

5. A short Review Balance Sheet Lists Assets and Liabilities like: Cash Accounts Receivable Inventory Accounts Payable Debts Common Stock Retained Earning And makes sure that Assets and Liabilities balance.

6. A short Review Cash Flow Statement Lists Sources and Uses of cash: Payments from Customers Issuance of Debt Sale of Plant and Equipment To Suppliers To Employees Purchase of new Equipment Payment of Long Term Debt And give the net change in Cash.

7. The Web The Web is incredibly useful when it comes to financial resources. One reason being the popularity of online brokers. Let’s have a look at some web sites: http://quote.yahoo.com/ http://quote.com/quotecom/ http://cnnfn.cnn.com/ Of course there are many more … but the basic info is usually quite similar.

8. Quote.com

9. Yahoo Finance

10. SEC All these web sites provide a wealth of information about companies. In the US all publicly listed companies need to regularly disclose critical financial (and other) information to the SEC (Securities and Exchange Commission) http://www.sec.gov/. http://www.sec.gov/ The information relevant to this chapter is conveniently accessed through any of the previously mentioned sites. Let us use Yahoo for the moment.

11. Finding Information Go to http://quote.yahoo.com/ Type a ‘g’ here (without the quotes). This is the so- called ticker symbol for Gillette.

12. Finding Information Finding data on http://quote.yahoo.com/ This is how is looks after typing the ‘g’. Press on the button to the right called ‘Get Quotes’.

13. Finding Information Finding data on http://quote.yahoo.com/ This will lead to a page with the table below. Click on ‘Profile’ under ‘More Info’.

14. Finding Information Finding data on http://quote.yahoo.com/ This will lead to a page with a synopsis of what the company does and with some very basic financial information. The link we are intersted in at the moment is: ‘Financials’. Let’s click on it.

15. Finding Information Finding data on http://quote.yahoo.com/ This will lead to a page with links to the Balance Sheet, Cash Flow Statement and the Income Statement. Balance Sheet Cash Flow Statement Income Statement

16. Numerical Methods Mainly additions and subtractions in Excel. Use fonts, style, etc. to clearly present the data. Since it is generally better to have the three financial statement on separate worksheets, it is important to know how to refer to a cell on another worksheet. E.g. to refer to cell A1 on the worksheet Sheet1: Use Name of the worksheet (must be in single quotes if the name contains spaces) Exclamation Mark Name of the cell ‘Sheet 1’!A1

17. Key Points of the Day It is imperative to know what the three basic financial statements are about/for. The three basic financial statement for many (if not most) US listed companies can readily be found on the web. The actual financial statements for Gillette can indeed almost entirely be understood by the material covered in this chapter. Hey! This is remarkably useful and not very difficult!