unlocking financial statements - day 3

Online SeminarDay 3

July 20, 2011

UnlockingFinancial

Statements

Understanding Financial Statements2

An Online Seminar Presented By

Donald W. Reynolds National Center

For Business Journalism

At Arizona State University

Understanding Financial Statements3

Presented By

James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass Communication University of Kansas jgentry@ku.edu

Schedule for Week Day 1: Introduction to financial

statements Day 2: Income statement Day 3: Balance sheet Day 4: Cash flows Day 5: Beyond the basics

Understanding Financial Statements4

Understanding Financial Statements5

Balance Sheet

Understanding Financial Statements6

Balance Sheet It balances Assets = Liabilities + Shareholders’

Equity

Understanding Financial Statements7

Assets Current assets

Cash and cash equivalents Accounts receivable Inventories Prepaids

Investments and other assets

Understanding Financial Statements8

Assets Property, plant and equipment, net

Land and improvement Buildings and improvements Equipment Less accumulated depreciation

Goodwill and other intangibles

Understanding Financial Statements9

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 Statements10

Impairment Instead of writing off over time, now use

“impairment testing” The impairment is expensed on the

income statement

Understanding Financial Statements11

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

Shareholders’ Equity

Understanding Financial Statements12

Capital stock Preferred stock Common stock

Additional paid-in capital Retained earnings Treasury stock

Total shareholders’ equity Total L + OE