tailieunhanh - The Balance Sheet and Financial Disclosures

Describe the purpose of the balance sheet and understand its usefulness and limitations. The Balance Sheet The purpose of the balance sheet is to report a company’s financial position on a particular date. Limitations: The balance sheet does not portray the market value of the entity as a going concern nor its liquidation value. p Resources such as employee skills and reputation are not recorded in the balance sheet. p Usefulness: p The balance sheet describes many of the resources a company has available for generating future cash flows. p It provides liquidity information useful in assessing a company’s ability to pay its current obligations | The Balance Sheet and Financial Disclosures 3 Copyright 2007 by The McGraw-Hill Companies Inc. All rights reserved. 3-2 Learning Objectives Describe the purpose of the balance sheet and understand its usefulness and limitations. The Balance Sheet 3-3 The purpose of the alance sheet is to report a company s financial position on a particular date. Limitations The balance sheet does not portray the market value of the entity as a going concern nor its liquidation value. Resources such as employee skills and reputation are not recorded in the balance sheet. Usefulness The balance sheet describes many of the resources a company has available for generating future cash flows. It provides liquidity information useful in assessing a company s ability to pay its current obligations. It provides long-term solvency information relating to the riskiness of a company with regard to the amount of liabilities in its capital structure. 1 3-5 Learning Objectives FedEx Corporation Balance Sheet 31-May In millions 2004 2003 Assets Current assets Cash and cash equivalents 1 046 538 Receivables less allowances 3 027 2 627 Spare parts supplies and fuel 249 228 Deferred income taxes 489 416 Prepaid expenses and other 159 132 Total current assets 4 970 3 941 Property and equipment at cost Aircraft and related equipment 7 001 6 624 Package handling ground support equipment and vehicles 5 296 5 013 Computer electronic equipment 3 537 3 180 Other 4 477 4 200 20 311 19 017 Less accumulated depreciation 11 274 10 317 Net property and equipment 9 037 8 700 Other long-term assets Goodwill 2 802 1 063 Prepaid pension cost 1 127 1 269 Intangible and other assets 1 198 412 Total other long-term assets 5 127 2 744 Total Assets 19 134 15 385 Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events 2 3-7 Current Assets Cash Cash Equivalents Short-term Investments Receivables Inventories Prepayments Cash equivalents include .