tailieunhanh - Lecture Essentials of corporate finance (2/e) – Chapter 2: Financial statements, taxes and cash flow

The topics discussed in this chapter are financial statements, taxes and cash flow. On completion of this chapter students will: Know the difference between book value and market value, know the difference between accounting income and cash flow, know the difference between average and marginal tax rates, know how to determine a firm’s cash flow from its financial statements. | Financial statements, taxes and cash flow Chapter 2 Key concepts and skills Know the difference between book value and market value Know the difference between accounting income and cash flow Know the difference between average and marginal tax rates Know how to determine a firm’s cash flow from its financial statements 2- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Chapter outline The balance sheet The income statement Taxes Cash flow 2- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh The balance sheet The balance sheet is a snapshot of a firm’s assets and liabilities at a given point in time. Assets: The left-hand side: Current or fixed In order of decreasing liquidity Liabilities and owners’ equity: The right-hand side: Current or long term In ascending order of when due to be paid Balance sheet identity Assets = Liabilities + Shareholders’ equity 2- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Balance sheet: Financial statement showing a firm’s accounting value on a particular date. Summarises the assets and liabilities of the company. Visit for company financial information. The balance sheet (cont.) Figure 2- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh The left-hand side lists the assets of the firm. Current assets are listed first because they are the most liquid. Fixed assets can include both tangible and intangible assets, and they are listed at the bottom because they generally are not very liquid. These are a direct result of management’s investment . | Financial statements, taxes and cash flow Chapter 2 Key concepts and skills Know the difference between book value and market value Know the difference between accounting income and cash flow Know the difference between average and marginal tax rates Know how to determine a firm’s cash flow from its financial statements 2- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Chapter outline The balance sheet The income statement Taxes Cash flow 2- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh The balance sheet The balance sheet is a snapshot of a firm’s assets and liabilities at a given point in time. Assets: The left-hand side: Current or fixed In order of decreasing liquidity Liabilities and owners’ equity: The right-hand side: Current or long term