AE 19 FINANCIAL

MANAGEMENT
FINANCIAL STATEMENTS and CASH FLOWS

PREPARED BY: JOBELLE CANDACE F. ABRERA, CPA, CTT

BUKIDNON STATE UNIVERSITY

What is the annual report, and what two
types of information are given in it?

-issued annually to stockholders

Contains:
analysis of the past year’s
operations
opinions about future prospects
 Two types of information are given in it:

 First, there is a verbal section, often

presented as

 Second, the annual report

presents
 THE ANNUAL REPORT

Who are some of the basic users of

financial statements, and how do
they use them?
Explain the following statement:

“While the balance sheet can be

thought of as a snapshot of the firm’s
financial position at a point in time,
the income statement reports on
operations over a period of time.”
Some additional points about the
BALANCE SHEET are worth noting:

1. DIY: Compute for Allied’s net worth

The Income Statement
Statement of Retained Earnings
 NET CASH FLOW
Fact: The value of an asset (including a
share of stock or the firm as a whole) is
determined by the it generates.
MAXIMIZE
SHAREHOLDERS’
CASH FLOW
WEALTH
MAXIMIZATION AVAILABLE TO
INVESTORS
 NET CASH FLOW
vs.
ACCOUNTING PROFIT
Statement of Cash Flows
Generally, both accounts payable and
accruals are “free” in the sense that no
explicit fee is charged for their use.
 NET OPERATING
WORKING CAPITAL

2. DIY: Compute for Allied’s NOWC for 2001 & 2000

3. DIY: Compute for Allied’s TOTAL Operating Capital for
2001 & 2000
NET OPERATING PROFIT
AFTER TAXES

4. DIY: Compute for Allied’s NOPAT

FREE CASH FLOW
FREE CASH FLOW
FREE CASH FLOW

5. DIY: Compute for Allied’s Operating Cash Flow

6. DIY: Compute for Allied’s Gross Investment

FREE CASH FLOW

7. DIY: Compute for Allied’s FCF

 FREE CASH FLOW

8. DIY: Check Allied’s FCF using this formula

 MVA & EVA
MARKET VALUE ADDED

9. DIY: Compute for Allied’s MVA

 MVA & EVA
ECONOMIC VALUE ADDED

10. DIY: Compute for Allied’s EVA