羅斯公司理財英文第九版課件

FinancialStatementsandCashFlowChapter2Copyright?2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinFinancialStatementsandCash0KeyConceptsandSkillsUnderstandtheinformationprovidedbyfinancialstatementsDifferentiatebetweenbookandmarketvaluesKnowthedifferencebetweenaverageandmarginaltaxratesKnowthedifferencebetweenaccountingincomeandcashflowCalculateafirm’scashflowKeyConceptsandSkillsUnderst1ChapterOutline2.1TheBalanceSheet2.2TheIncomeStatement2.3Taxes2.4NetWorkingCapital2.5FinancialCashFlow2.6TheAccountingStatementofCashFlows2.7CashFlowManagementChapterOutline2.1TheBalance2SourcesofInformationSourcesofInformation32.1TheBalanceSheetAnaccountant’ssnapshotofthefirm’saccountingvalueataspecificpointintimeTheBalanceSheetIdentityis:Assets≡Liabilities+Stockholder’sEquity2.1TheBalanceSheetAnaccoun4U.S.CompositeCorporationBalanceSheet2010200920102009Currentassets:CurrentLiabilities:Cashandequivalents$140$107Accountspayable$213$197Accountsreceivable294270Notespayable5053Inventories269280Accruedexpenses223205Other5850Totalcurrentliabilities$486$455Totalcurrentassets$761$707Long-termliabilities:Fixedassets:Deferredtaxes$117$104Property,plant,andequipment$1,423$1,274Long-termdebt471458Lessaccumulateddepreciation(550)(460)Totallong-termliabilities$588$562Netproperty,plant,andequipment873814Intangibleassetsandother245221Stockholder'sequity:Totalfixedassets$1,118$1,035Preferredstock$39$39Commonstock($1parvalue)5532Capitalsurplus347327Accumulatedretainedearnings390347Lesstreasurystock(26)(20)Totalequity$805$725Totalassets$1,879$1,742Totalliabilitiesandstockholder'sequity$1,879$1,742Theassetsarelistedinorderbythelengthoftimeitwouldnormallytakeafirmwithongoingoperationstoconvertthemintocash.Clearly,cashismuchmoreliquidthanproperty,plant,andequipment.U.S.CompositeCorporationBal5BalanceSheetAnalysisWhenanalyzingabalancesheet,theFinanceManagershouldbeawareofthreeconcerns:LiquidityDebtversusequityValueversuscostBalanceSheetAnalysisWhenana6LiquidityReferstotheeaseandquicknesswithwhichassetscanbeconvertedtocash—withoutasignificantlossinvalueCurrentassetsarethemostliquid.Somefixedassetsareintangible.Themoreliquidafirm’sassets,thelesslikelythefirmistoexperienceproblemsmeetingshort-termobligations.Liquidassetsfrequentlyhavelowerratesofreturnthanfixedassets.LiquidityReferstotheeasea7DebtversusEquityCreditorsgenerallyreceivethefirstclaimonthefirm’scashflow.Shareholder’sequityistheresidualdifferencebetweenassetsandliabilities.DebtversusEquityCreditorsge8ValueversusCostUnderGenerallyAcceptedAccountingPrinciples(GAAP),auditedfinancialstatementsoffirmsintheU.S.carryassetsatcost.Marketvalueisthepriceatwhichtheassets,liabilities,andequitycouldactuallybeboughtorsold,whichisacompletelydifferentconceptfromhistoricalcost.ValueversusCostUnderGeneral92.2TheIncomeStatementMeasuresfinancialperformanceoveraspecificperiodoftimeTheaccountingdefinitionofincomeis: Revenue–Expenses≡Income2.2TheIncomeStatementMeasur10U.S.C.C.IncomeStatementTotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeAdditiontoretainedearnings$43Dividends:$43Theoperationssectionoftheincomestatementreportsthefirm’srevenuesandexpensesfromprincipaloperations.$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTota11Totaloperatingrevenues$2,262Costofgoodssold1,655Selling,general,andadministrativeexpenses327Depreciation90Operatingincome$190Otherincome29Earningsbeforeinterestandtaxes$219Interestexpense49Pretaxincome$170Taxes84Current:$71Deferred:$13Netincome$86Additiontoretainedearnings:$43Dividends:$43Thenon-operatingsectionoftheincomestatementincludesallfinancingcosts,suchasinterestexpense.U.S.C.C.IncomeStatementTotaloperatingrevenues$2,26212TotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeAdditiontoretainedearnings:$43Dividends:$43Usuallyaseparatesectionreportstheamountoftaxesleviedonincome.$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTotaloperatingrevenuesCosto13TotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeRetainedearnings:$43Dividends:$43Netincomeisthe“bottomline.”$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTotaloperatingrevenuesCosto14IncomeStatementAnalysisTherearethreethingstokeepinmindwhenanalyzinganincomestatement:GenerallyAcceptedAccountingPrinciples(GAAP)Non-CashItemsTimeandCostsIncomeStatementAnalysisThere15GAAPThematchingprincipleofGAAPdictatesthatrevenuesbematchedwithexpenses.Thus,incomeisreportedwhenitisearned,eventhoughnocashflowmayhaveoccurred.GAAPThematchingprincipleof16Non-CashItemsDepreciationisthemostapparent.Nofirmeverwritesacheckfor“depreciation.”Anothernon-cashitemisdeferredtaxes,whichdoesnotrepresentacashflow.Thus,netincomeisnotcash.Non-CashItemsDepreciationis17TimeandCostsIntheshort-run,certainequipment,resources,andcommitmentsofthefirmarefixed,butthefirmcanvarysuchinputsaslaborandrawmaterials.Inthelong-run,allinputsofproduction(andhencecosts)arevariable.Financialaccountantsdonotdistinguishbetweenvariablecostsandfixedcosts.Instead,accountingcostsusuallyfitintoaclassificationthatdistinguishesproductcostsfromperiodcosts.TimeandCostsIntheshort-run182.3TaxesTheonethingwecanrelyonwithtaxesisthattheyarealwayschangingMarginalvs.averagetaxratesMarginal–thepercentagepaidonthenextdollarearnedAverage–thetaxbill/taxableincomeOthertaxes2.3TaxesTheonethingwecan19MarginalversusAverageRatesSupposeyourfirmearns$4millionintaxableincome.Whatisthefirm’staxliability?Whatistheaveragetaxrate?Whatisthemarginaltaxrate?Ifyouareconsideringaprojectthatwillincreasethefirm’staxableincomeby$1million,whattaxrateshouldyouuseinyouranalysis?MarginalversusAverageRates202.4NetWorkingCapitalNetWorkingCapital≡

CurrentAssets–CurrentLiabilitiesNWCusuallygrowswiththefirm2.4NetWorkingCapitalNetWor21U.S.C.C.BalanceSheet2010200920102009Currentassets:CurrentLiabilities:Cashandequivalents$140$107Accountspayable$213$197Accountsreceivable294270Notespayable5053Inventories269280Accruedexpenses223205Other5850Totalcurrentliabilities$486$455Totalcurrentassets$761$707Long-termliabilities:Fixedassets:Deferredtaxes$117$104Property,plant,andequipment$1,423$1,274Long-termdebt471458Lessaccumulateddepreciation(550)(460Totallong-termliabilities$588$562Netproperty,plant,andequipment873814Intangibleassetsandother245221Stockholder'sequity:Totalfixedassets$1,118$1,035Preferredstock$39$39Commonstock($1parvalue)5532Capitalsurplus347327Accumulatedretainedearnings390347Lesstreasurystock(26)(20)Totalequity$805$725Totalassets$1,879$1,742Totalliabilitiesandstockholder'sequity$1,879$1,742HereweseeNWCgrowto$275millionin2010from$252millionin2009.Thisincreaseof$23millionisaninvestmentofthefirm.$23million$275m=$761m-$486m$252m=$707-$455U.S.C.C.BalanceSheet20102009222.5FinancialCashFlowInfinance,themostimportantitemthatcanbeextractedfromfinancialstatementsistheactualcashflowofthefirm.Sincethereisnomagicinfinance,itmustbethecasethatthecashflowreceivedfromthefirm’sassetsmustequalthecashflowstothefirm’screditorsandstockholders.CF(A)≡

CF(B)+CF(S)

2.5FinancialCashFlowInfina23U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending-173(Acquisitionsoffixedassetsminussalesoffixedassets)Additionstonetworkingcapital-23Total$42CashFlowofInvestorsintheFirmDebt$36(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity6(Dividendsplusrepurchaseofequityminusnewequityfinancing)Total$42OperatingCashFlow:EBIT $219Depreciation $90CurrentTaxes -$71OCF $238U.S.C.C.FinancialCashFlowCa24U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)TotalCapitalSpendingPurchaseoffixedassets $198Salesoffixedassets -$25CapitalSpending $173-173-23$42$366$42U.S.C.C.FinancialCashFlowCa25U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)TotalNWCgrewfrom$275millionin2010from$252millionin2009.Thisincreaseof$23millionistheadditiontoNWC.-173-23$42$366$42U.S.C.C.FinancialCashFlowCa26U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)Total-173-23$42$366$42U.S.C.C.FinancialCashFlowCa27U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)TotalCashFlowtoCreditorsInterest $49Retirementofdebt73 Debtservice 122Proceedsfromnewdebtsales -86Total $36-173-23$42$366$42U.S.C.C.FinancialCashFlowCa28U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)TotalCashFlowtoStockholdersDividends $43Repurchaseofstock6 CashtoStockholders49Proceedsfromnewstockissue -43Total $6-173-23$42$366$42U.S.C.C.FinancialCashFlowCa29U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending(Acquisitionsoffixedassetsminussalesoffixedassets)AdditionstonetworkingcapitalTotalCashFlowofInvestorsintheFirmDebt(Interestplusretirementofdebtminuslong-termdebtfinancing)Equity(Dividendsplusrepurchaseofequityminusnewequityfinancing)TotalThecashflowreceivedfromthefirm’sassetsmustequalthecashflowstothefirm’screditorsandstockholders:-173-23$42$366$42U.S.C.C.FinancialCashFlowCa302.5TheStatementofCashFlowsThereisanofficialaccountingstatementcalledthestatementofcashflows.Thishelpsexplainthechangeinaccountingcash,whichforU.S.Compositeis$33millionin2010.Thethreecomponentsofthestatementofcashflowsare:CashflowfromoperatingactivitiesCashflowfrominvestingactivitiesCashflowfromfinancingactivities2.5TheStatementofCashFlow31U.S.C.C.CashFlowfromOperationsTocalculatecashflowfromoperations,startwithnetincome,addbacknon-cashitemslikedepreciationandadjustforchangesincurrentassetsandliabilities(otherthancash).OperationsNetIncomeDepreciationDeferredTaxesChangesinAssetsandLiabilitiesAccountsReceivableInventoriesAccountsPayableAccruedExpensesOtherTotalCashFlowfromOperations$869013-24111618$202-8U.S.C.C.CashFlowfromOperat32U.S.C.C.CashFlowfromInvestingCashflowfrominvestingactivitiesinvolveschangesincapitalassets:acquisitionoffixedassetsandsalesoffixedassets(i.e.,netcapitalexpenditures).AcquisitionoffixedassetsSalesoffixedassetsTotalCashFlowfromInvestingActivities-$19825-$173U.S.C.C.CashFlowfromInvest33U.S.C.C.CashFlowfromFinancingCashflowstoandfromcreditorsandownersincludechangesinequityanddebt.Retirementofdebt(includesnotes)Proceedsfromlong-termdebtsales-$7386TotalCashFlowfromFinancing$4DividendsRepurchaseofstock-43Proceedsfromnewstockissue43-6Changeinnotespayable-3U.S.C.C.CashFlowfromFinanc34U.S.C.C.StatementofCashFlowsThestatementofcashflowsistheadditionofcashflowsfromoperations,investing,andfinancing.OperationsNetIncomeDepreciationDeferredTaxesChangesinAssetsandLiabilitiesAccountsReceivableInventoriesAccountsPayableAccruedExpenses$869013-24111618OtherTotalCashFlowfromOperations$202-8AcquisitionoffixedassetsSalesoffixedassetsTotalCashFlowfromInvestingActivities-$19825-$173InvestingActivitiesFinancingActivitiesRetirementofdebt(includesnotes)Proceedsfromlong-termdebtsales-$7386DividendsRepurchaseofstockProceedsfromnewstockissueTotalCashFlowfromFinancing-4343$4-6ChangeinCash(onthebalancesheet)$33NotesPayable-3U.S.C.C.StatementofCashFlo352.7CashFlowManagementEarningscanbemanipulatedusingsubjectivedecisionsrequiredunderGAAPTotalcashflowismoreobjective,buttheunderlyingcomponentsmayalsobe“managed”Movingcashflowfromtheinvestingsectiontotheoperatingsectionmaymakethefirm’sbusinessappearmorestable2.7CashFlowManagementEarnin36QuickQuizWhatisthedifferencebetweenbookvalueandmarketvalue?Whichshouldweusefordecisionmakingpurposes?Whatisthedifferencebetweenaccountingincomeandcashflow?Whichdoweneedtousewhenmakingdecisions?Whatisthedifferencebetweenaverageandmarginaltaxrates?Whichshouldweusewhenmakingfinancialdecisions?Howdowedetermineafirm’scashflows?Whataretheequations,andwheredowefindtheinformation?QuickQuizWhatisthedifferen37FinancialStatementsandCashFlowChapter2Copyright?2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinFinancialStatementsandCash38KeyConceptsandSkillsUnderstandtheinformationprovidedbyfinancialstatementsDifferentiatebetweenbookandmarketvaluesKnowthedifferencebetweenaverageandmarginaltaxratesKnowthedifferencebetweenaccountingincomeandcashflowCalculateafirm’scashflowKeyConceptsandSkillsUnderst39ChapterOutline2.1TheBalanceSheet2.2TheIncomeStatement2.3Taxes2.4NetWorkingCapital2.5FinancialCashFlow2.6TheAccountingStatementofCashFlows2.7CashFlowManagementChapterOutline2.1TheBalance40SourcesofInformationSourcesofInformation412.1TheBalanceSheetAnaccountant’ssnapshotofthefirm’saccountingvalueataspecificpointintimeTheBalanceSheetIdentityis:Assets≡Liabilities+Stockholder’sEquity2.1TheBalanceSheetAnaccoun42U.S.CompositeCorporationBalanceSheet2010200920102009Currentassets:CurrentLiabilities:Cashandequivalents$140$107Accountspayable$213$197Accountsreceivable294270Notespayable5053Inventories269280Accruedexpenses223205Other5850Totalcurrentliabilities$486$455Totalcurrentassets$761$707Long-termliabilities:Fixedassets:Deferredtaxes$117$104Property,plant,andequipment$1,423$1,274Long-termdebt471458Lessaccumulateddepreciation(550)(460)Totallong-termliabilities$588$562Netproperty,plant,andequipment873814Intangibleassetsandother245221Stockholder'sequity:Totalfixedassets$1,118$1,035Preferredstock$39$39Commonstock($1parvalue)5532Capitalsurplus347327Accumulatedretainedearnings390347Lesstreasurystock(26)(20)Totalequity$805$725Totalassets$1,879$1,742Totalliabilitiesandstockholder'sequity$1,879$1,742Theassetsarelistedinorderbythelengthoftimeitwouldnormallytakeafirmwithongoingoperationstoconvertthemintocash.Clearly,cashismuchmoreliquidthanproperty,plant,andequipment.U.S.CompositeCorporationBal43BalanceSheetAnalysisWhenanalyzingabalancesheet,theFinanceManagershouldbeawareofthreeconcerns:LiquidityDebtversusequityValueversuscostBalanceSheetAnalysisWhenana44LiquidityReferstotheeaseandquicknesswithwhichassetscanbeconvertedtocash—withoutasignificantlossinvalueCurrentassetsarethemostliquid.Somefixedassetsareintangible.Themoreliquidafirm’sassets,thelesslikelythefirmistoexperienceproblemsmeetingshort-termobligations.Liquidassetsfrequentlyhavelowerratesofreturnthanfixedassets.LiquidityReferstotheeasea45DebtversusEquityCreditorsgenerallyreceivethefirstclaimonthefirm’scashflow.Shareholder’sequityistheresidualdifferencebetweenassetsandliabilities.DebtversusEquityCreditorsge46ValueversusCostUnderGenerallyAcceptedAccountingPrinciples(GAAP),auditedfinancialstatementsoffirmsintheU.S.carryassetsatcost.Marketvalueisthepriceatwhichtheassets,liabilities,andequitycouldactuallybeboughtorsold,whichisacompletelydifferentconceptfromhistoricalcost.ValueversusCostUnderGeneral472.2TheIncomeStatementMeasuresfinancialperformanceoveraspecificperiodoftimeTheaccountingdefinitionofincomeis: Revenue–Expenses≡Income2.2TheIncomeStatementMeasur48U.S.C.C.IncomeStatementTotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeAdditiontoretainedearnings$43Dividends:$43Theoperationssectionoftheincomestatementreportsthefirm’srevenuesandexpensesfromprincipaloperations.$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTota49Totaloperatingrevenues$2,262Costofgoodssold1,655Selling,general,andadministrativeexpenses327Depreciation90Operatingincome$190Otherincome29Earningsbeforeinterestandtaxes$219Interestexpense49Pretaxincome$170Taxes84Current:$71Deferred:$13Netincome$86Additiontoretainedearnings:$43Dividends:$43Thenon-operatingsectionoftheincomestatementincludesallfinancingcosts,suchasinterestexpense.U.S.C.C.IncomeStatementTotaloperatingrevenues$2,26250TotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeAdditiontoretainedearnings:$43Dividends:$43Usuallyaseparatesectionreportstheamountoftaxesleviedonincome.$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTotaloperatingrevenuesCosto51TotaloperatingrevenuesCostofgoodssoldSelling,general,andadministrativeexpensesDepreciationOperatingincomeOtherincomeEarningsbeforeinterestandtaxesInterestexpensePretaxincomeTaxesCurrent:$71Deferred:$13NetincomeRetainedearnings:$43Dividends:$43Netincomeisthe“bottomline.”$2,2621,65532790$19029$21949$17084$86U.S.C.C.IncomeStatementTotaloperatingrevenuesCosto52IncomeStatementAnalysisTherearethreethingstokeepinmindwhenanalyzinganincomestatement:GenerallyAcceptedAccountingPrinciples(GAAP)Non-CashItemsTimeandCostsIncomeStatementAnalysisThere53GAAPThematchingprincipleofGAAPdictatesthatrevenuesbematchedwithexpenses.Thus,incomeisreportedwhenitisearned,eventhoughnocashflowmayhaveoccurred.GAAPThematchingprincipleof54Non-CashItemsDepreciationisthemostapparent.Nofirmeverwritesacheckfor“depreciation.”Anothernon-cashitemisdeferredtaxes,whichdoesnotrepresentacashflow.Thus,netincomeisnotcash.Non-CashItemsDepreciationis55TimeandCostsIntheshort-run,certainequipment,resources,andcommitmentsofthefirmarefixed,butthefirmcanvarysuchinputsaslaborandrawmaterials.Inthelong-run,allinputsofproduction(andhencecosts)arevariable.Financialaccountantsdonotdistinguishbetweenvariablecostsandfixedcosts.Instead,accountingcostsusuallyfitintoaclassificationthatdistinguishesproductcostsfromperiodcosts.TimeandCostsIntheshort-run562.3TaxesTheonethingwecanrelyonwithtaxesisthattheyarealwayschangingMarginalvs.averagetaxratesMarginal–thepercentagepaidonthenextdollarearnedAverage–thetaxbill/taxableincomeOthertaxes2.3TaxesTheonethingwecan57MarginalversusAverageRatesSupposeyourfirmearns$4millionintaxableincome.Whatisthefirm’staxliability?Whatistheaveragetaxrate?Whatisthemarginaltaxrate?Ifyouareconsideringaprojectthatwillincreasethefirm’staxableincomeby$1million,whattaxrateshouldyouuseinyouranalysis?MarginalversusAverageRates582.4NetWorkingCapitalNetWorkingCapital≡

CurrentAssets–CurrentLiabilitiesNWCusuallygrowswiththefirm2.4NetWorkingCapitalNetWor59U.S.C.C.BalanceSheet2010200920102009Currentassets:CurrentLiabilities:Cashandequivalents$140$107Accountspayable$213$197Accountsreceivable294270Notespayable5053Inventories269280Accruedexpenses223205Other5850Totalcurrentliabilities$486$455Totalcurrentassets$761$707Long-termliabilities:Fixedassets:Deferredtaxes$117$104Property,plant,andequipment$1,423$1,274Long-termdebt471458Lessaccumulateddepreciation(550)(460Totallong-termliabilities$588$562Netproperty,plant,andequipment873814Intangibleassetsandother245221Stockholder'sequity:Totalfixedassets$1,118$1,035Preferredstock$39$39Commonstock($1parvalue)5532Capitalsurplus347327Accumulatedretainedearnings390347Lesstreasurystock(26)(20)Totalequity$805$725Totalassets$1,879$1,742Totalliabilitiesandstockholder'sequity$1,879$1,742HereweseeNWCgrowto$275millionin2010from$252millionin2009.Thisincreaseof$23millionisaninvestmentofthefirm.$23million$275m=$761m-$486m$252m=$707-$455U.S.C.C.BalanceSheet20102009602.5FinancialCashFlowInfinance,themostimportantitemthatcanbeextractedfromfinancialstatementsistheactualcashflowofthefirm.Sincethereisnomagicinfinance,itmustbethecasethatthecashflowreceivedfromthefirm’sassetsmustequalthecashflowstothefirm’screditorsandstockholders.CF(A)≡

CF(B)+CF(S)

2.5FinancialCashFlowInfina61U.S.C.C.FinancialCashFlowCashFlowoftheFirmOperatingcashflow$238(Earningsbeforeinterestandtaxesplusdepreciationminustaxes)Capitalspending-173(Acquisitionsoffixedassetsminussalesoffixedassets)Additionstonetworkingcapital-23Total$42CashFlowof