Online SeminarDay 3

July 21, 2010

Unlocking Financial Statements

Balance Sheet

Understanding Financial Statements2

Understanding Financial Statements3

Balance Sheet It balances Assets = Liabilities + Shareholders’

Equity

Understanding Financial Statements4

Assets Current assets

Cash and cash equivalents Accounts receivable Inventories Prepaids

Investments and other assets

Understanding Financial Statements5

Assets Property, plant and equipment, net

Land and improvement Buildings and improvements Equipment Less accumulated depreciation

Goodwill and other intangibles

Understanding Financial Statements6

Goodwill Difference between what a firm pays to buy

another company and the book value (total assets minus total liabilities) of that company.

Has been written off over time, typically 40 years

No longer amortize Other intangible assets will continue to be

amortized over useful lives

Understanding Financial Statements7

Impairment Instead of writing off over time, now use

“impairment testing” The impairment is expensed on the

income statement

Understanding Financial Statements8

Liabilities Current liabilities

Accounts payable Accrued liabilities Income taxes Current maturity of long-term debt

Noncurrent liabilities Long-term debt Deferred income taxes

Commitments and contingencies

Understanding Financial Statements9

Shareholders’ Equity Capital stock

Preferred stock Common stock

Additional paid-in capital Retained earnings Treasury stock

Total shareholders’ equity Total L + OE