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Assets Liabilities ShareholdersEquity

Cash NonCash

Debt

Payables

Other

Obligations

Receivables

Inventories

PP&E

Intangibles

WhatAreTheFinancialsDoing?

Assets Liabilities ShareholdersEquity

Cash NonCash

Debt

Payables

Other

Obligations

Contributed

Capital

Retained

Earnings

Stock Issued

Stock

Repurchased

Other

Net Income -

Dividends

Receivables

Inventories

PP&E Intangibles

WhatAreTheFinancialsDoing?

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Assets Liabilities ShareholdersEquity

Cash NonCash

Debt

Payables

Other

Obligations

Contributed

Capital

Retained

EarningsSoWhenNetIncome

Increases:

ShareholdersEquity

Increases

ButCashDoesNot

NeedToGoUp Stock Issued Stock

Repurchased

Other

Net Income -Dividends

WhatAreTheFinancialsDoing?

AnalyzingTransactions

Net Income - Dividends

Liabilities

Cash NonCash Contributed

CapitalRetained

Earnings

Assets Liabilities ShareholdersEquity

Assets ShareholdersEquityBeg

End

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Recap:InterrelationshipOfTheStatements

Net Income - Dividends

Liabilities

Cash NonCash Contributed

CapitalRetained

Earnings

Assets Liabilities ShareholdersEquity

Assets ShareholdersEquityBeg

End

Statement

OfCash

Flows IncomeStatement

Beg,BalanceSheet

End,BalanceSheet

Changesin

Shareholder

equity

HowDoBusinessActivitiesAffectFinancials?

ForExample:

ACompanysEmployeesEarnedSalariesOf$200But

HaveOnlyBeenPaid$150

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ImpactOfTransactionsOnFinancials

BalanceSheet: 150(Cash), +50(AccruedSalaries),200(Ret.Earnings)

$150 +$50 $200

(cash) (AccruedSalaries) (SalaryExp)

Statement

OfCash

Flows

Income

Statement

IncomeStatement:200(Income)DueTo200(SalaryExp)

StatementofCashFlows:150(CashFromOperatingActivities)

HowDoBusinessActivitiesAffectFinancials?

ForExample:

CompanySellsObsoleteFactoryEquipmentFor$200.

AssetHasNetBookValueOf$50.

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ImpactOfTransactionsOnFinancials

BalanceSheet: +200(Cash),50(NetFixedAsset),+150(Ret.Earnings)

+$200 $50 +$150

(Cash) (NetFixedAsset) (Gain OnSale)

Statement

OfCash

Flows

Income

Statement

IncomeStatement:+150

(Income)

Due

To

Net

Gain

On

Sale

StatementofCashFlows:+200(CashFromInvestingActivities)

HowDoBusinessActivitiesAffectFinancials?

ForExample:

CompanyReceives$1MCashPaymentUponSigning

ANewLongTermSupplyAgreement.

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ImpactOfTransactionsOnFinancials

BalanceSheet: +$1M(Cash),($1M)(Ret.Earnings)

+$1M $1M

(Cash) (Income)

Statement

OfCash

Flows

Income

Statement

IncomeStatement:+$1M

(Net

Income)

StatementofCashFlows:+$1M(CashFromOperatingActivities)

Can We Recognize This Income?

Balance Sheet:

Income Statement:

Statement of Cash Flows:

Income Statement: None

ImpactOfTransactionsOnFinancials

+$1M(Cash),($1M)(NonCashLiability)

+$1M $1M

(Cash) (NonCashLiab)

Statement

OfCash

Flows

+$1M(CashFromOperatingActivities)

Income

Statement

$0M