CHAPTER 3

FINANCIAL STATEMENTS,
CASH FLOW, AND TAXES

Presenter:
Ms. JADE JUNE L. CALIBO;
Ms. LEIZYL ANN P. CANOBAS;
and Ms. PUREZA NEMA T.
CATALONIA
 FINANCIAL STATEMENTS AND REPORTS

Financial statements are written document

contains a company's operations and financial
performance.
Annual Report

An annual report is a detailed report of a

company's operations over the previous year.
Annual reports are intended to provide
information about the company's operations
and financial results to shareholders and other
interested parties.
Is the most important report that corporations
issue to stockholders.
 The Four Basic

1. Balance Sheet – shows what assets the company owns and who has claims
on those assets as of a given date – Ex. December 31, 2008.
2. Income Statement – shows the firm’s sales and costs during some past
period – Ex. 2008
3. Statement of Cashflows – shows how much cash the firm began the year
with, how much cash it ended up with, and what it did to increase or
decrease its cash.
4. Statement of Stockholders’ Equity – shows the amount of equity the
stockholders had at the start of the year, the items that increased or
decreased equity, and the equity at the end of the year.
BALANCE SHEET
It is a “snapshot” of a firm’s
position at a specific point in
time. Figure 3-1 shows the
layout of a typical balance
sheet. The left side of the
statement shows the assets
that the company owns,
while the right side shows the
firms liabilities and
stockholders’ equity.
 Two Basic Types of Claims against Assets
Liabilities
 Are any outstanding debts
owed by your corporation,
such as bank loans,
mortgages, unpaid bills, or any
other amount of money owed
to anyone else. It consist of
claims that must be paid off
within one year (current
liabilities).
Stockholders’ Equity
 is the value of a company's
assets after all liabilities have
been paid off. It is measured
as the capital contributed by
a company's shareholders,
plus contributed capital and
profits provided by the
company's operations, minus
any dividends paid out.
 Stockholders’ Equity in Two Ways
 If the company has retained earnings over the years:

Stockholders’ Equity = Paid-in Capital + Retained Earnings

 It can also be thought of as a residual:

Stockholders’ Equity = Total Assets – Total Liabilities

Allied’s Balance Sheet
 Points about the Balance Sheet
1. Cash versus other assets
2. Working Capital
3. Net Working Capital
Net working capital = Current assets – (Payables + Accruals)

4. Other Sources of Funds

Preferred Stock
Convertible Bonds
5. Depreciation
Internal Revenue Service (IRS)
Generally Accepted Accounting Principles (GAAP)
6. Market Value versus Book Value
7. The Time Dimension
 INCOME STATEMENT
- is a financial statement that
indicates the income and
expenses of a business. It also
indicates whether a business
is profitable or losing money
for a given time span. The
income statement, along with
the balance sheet and cash
flow statement, aids in the
understanding of the
company's financial health.
 Operating Income

 Is also called EBIT, or Earnings Before Interest and Taxes.

 operating income is an accounting statistic that calculates
the amount of profit realized from a business's activities
(COGS) after deducting operating costs such as salaries,
depreciation, and cost of goods sold.
Operating Income = Sales Revenues – Operating Costs
= 3,000 – 2,716.2
= 283.8
Earnings per share Dividends per share

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒑𝒂𝒊𝒅 𝒕𝒐 𝒄𝒐𝒎𝒎𝒐𝒏 𝒔𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔

𝑬𝑷𝑺 = 𝑫𝑷𝑺 =
𝑪𝒐𝒎𝒎𝒐𝒏 𝒔𝒉𝒂𝒓𝒆𝒔 𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈 𝑪𝒐𝒎𝒎𝒐𝒏 𝒔𝒉𝒂𝒓𝒆𝒔 𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈
117,500,000 57,500,000
= 50,000,000
= 50,000,000
= 2.35 = 1.15
Important Components of Operating
Costs
 Depreciation  Amortization
- the charge to reflect - a noncash charge
the cost of assets used up in similar to depreciation
the production process. except that it is used to
write off the costs of
intangible assets.
 Thank You and God Bless ☺

Presenter: Ms. JADE JUNE L. CALIBO, BSBA-HRDM