Learning Objectives:

- Identify & discuss overview and

function of financial statements.
- Apply several basic financial
statement major ratio & analysis.
- Construct the basic & uses of
fund.
Understanding Financial Statements,
Taxes, and Cash Flows
Definition & Functions of
Financial Statements
Income Statement/Profit and Loss
account
 Indicates what a firm gets from its current
operation
 Consider all variables that are related to sales.

Balance Sheet
 Summary of financial position during a certain
accounting period
 It shows the assets, liabilities and owners’ equity
 Income Statement

SALES
- EXPENSES
= PROFIT
 Income Statement

Revenue
SALES
- EXPENSES
= PROFIT
 Income Statement

SALES •Cost of Goods Sold

- EXPENSES
= PROFIT
 Income Statement

SALES •Cost of Goods Sold

•Operating Expenses
- EXPENSES
= PROFIT
 Income Statement

SALES •Cost of Goods Sold

•Operating Expenses
- EXPENSES (marketing, administrative)

= PROFIT
 Income Statement

SALES •Cost of Goods Sold

•Operating Expenses
- EXPENSES (marketing, administrative)
•Financing Costs
= PROFIT
 Income Statement

SALES •Cost of Goods Sold

•Operating Expenses
- EXPENSES (marketing, administrative)
•Financing Costs
= PROFIT
•Taxes
 SALES Income Statement
- Cost of Goods Sold
GROSS PROFIT
- Operating Expenses
OPERATING INCOME (EBIT)
- Interest Expense
EARNINGS BEFORE TAXES (EBT)
- Income Taxes
EARNINGS AFTER TAXES (EAT)
- Preferred Stock Dividends
- NET INCOME AVAILABLE
TO COMMON STOCKHOLDERS
 SALES Income Statement
- Cost of Goods Sold
GROSS PROFIT
- Operating Expenses
OPERATING INCOME (EBIT)
- Interest Expense
EARNINGS BEFORE TAXES (EBT)
- Income Taxes
EARNINGS AFTER TAXES (EAT)
- Preferred Stock Dividends
- NET INCOME AVAILABLE
TO COMMON STOCKHOLDERS
 SALES Income Statement
- Cost of Goods Sold
GROSS PROFIT
- Operating Expenses
OPERATING INCOME (EBIT)
- Interest Expense
EARNINGS BEFORE TAXES (EBT)
- Income Taxes
EARNINGS AFTER TAXES (EAT)
- Preferred Stock Dividends
- NET INCOME AVAILABLE
TO COMMON STOCKHOLDERS
 Balance Sheet

Outstanding
Debt
Total Assets = +
Shareholders’
Equity
Balance Sheet
Balance Sheet
Assets
Balance Sheet
Assets Liabilities (Debt) & Equity
 Balance Sheet
Assets Liabilities (Debt) & Equity
Current Assets Current Liabilities
Cash Accounts Payable
Marketable Securities Accrued Expenses
Short-term notes
Accounts Receivable
Inventories
Long-Term Liabilities
Long-term notes
Prepaid Expenses Mortgages
Fixed Assets Equity
Machinery & Preferred Stock
Equipment Common Stock (Par
Buildings and Land value)
Other Assets Paid in Capital
Retained Earnings
Investments & patents
 Assets
 Current Assets: assets that are relatively
liquid, and are expected to be converted
to cash within a year.
 Cash, marketable securities, accounts
receivable, inventories, prepaid expenses.
 Assets
 Current Assets: assets that are relatively
liquid, and are expected to be converted
to cash within a year.
 Cash, marketable securities, accounts
receivable, inventories, prepaid expenses.
 Fixed Assets:
 Assets
 Current Assets: assets that are relatively
liquid, and are expected to be converted
to cash within a year.
 Cash, marketable securities, accounts
receivable, inventories, prepaid expenses.
 Fixed Assets: machinery
and equipment, buildings,
and land.
 Assets
 Current Assets: assets that are relatively
liquid, and are expected to be converted
to cash within a year.
 Cash, marketable securities, accounts
receivable, inventories, prepaid expenses.
 Fixed Assets: machinery and equipment,
buildings, and land.
 Other Assets:
 Assets
 Current Assets: assets that are relatively
liquid, and are expected to be converted
to cash within a year.
 Cash, marketable securities, accounts
receivable, inventories, prepaid expenses.
 Fixed Assets: machinery and equipment,
buildings, and land.
 Other Assets: any asset that is not a
current asset or fixed asset.
 Intangible assets, such as patents and
copyrights.
The Concept of Book & Market Value

 In general, GAAP requires that the firm

report assets on its balance sheet using the
historical costs (book value).
 Cash and assets held for sale (such as
marketable securities) are an exception to
the rule. These assets are reported using the
lower of their cost or current market value.
The Balance Sheet (cont.)
 Assets whose value is expected to decline
over time (such as equipment) is reported as
“net equipment” which is equal to the
historical cost minus accumulated
depreciation.
 Note, the net value reported on balance
sheet could be significantly different from the
market value of the asset.
 Financing
 Debt Capital: financing provided by a
creditor.
 Short-term debt: borrowed money that
must be repaid within the next 12 months.
 Accounts payable, other payables such as
interest or taxes payable, accrued expenses,
short-term notes.
 Long-term debt: loans from banks or
other sources that lend money for longer
than 12 months.
 Financing
 Equity Capital: shareholders’ investment
in the firm.
 Financing
 Equity Capital: shareholders’ investment
in the firm.
 Preferred Stockholders: receive fixed
dividends, and have higher priority than
common stockholders in event of
liquidation of the firm.
 Common Stockholders: residual owners
of a business. They receive whatever is
left after creditors and preferred
stockholders are paid.
Market Value Added vs.
Economic Value Added
 Market Value Added (MVA) is the
difference between the market value of a
company and the capital contributed by
investors (both bondholders and
shareholders). In other words, it is the sum
of all capital claims held against the
company plus the market value of debt and
equity.
 If MVA is positive, the firm has added
value. If it is negative, the firm has
destroyed value
 Economic Value Added or EVA is an
estimate of a firm's economic profit.
 Quite simply, EVA is the profit earned by
the firm less the cost of financing the
firm's capital.
 Corporate Income Tax Rates
Since 1993
Taxable Income Corporate Tax Rate

$1 - $50,000 15%
$50,001 - $75,000 25%
$75,001 - $100,000 34%
$100,001 - $335,000 39%
$335,001 - $10,000,000 34%
$10,000,001 - $15,000,000 35%
$15,000,001 - $18,333,333 38%
over $18,333,333 35%
Tax Example:
 Space Cow Computer has sales of $32
million, cost of goods sold at 60% of
sales, cash operating expenses of $2.4
million, and $1.4 million in
depreciation expense. The firm has
$12 million in 9.5% bonds outstanding.
The firm will pay $500,000 in
dividends to its common stock holders.
 Calculate the firm’s tax liability.
Sales $32,000,000
Cost of Goods Sold (19,200,000)
Operating Expenses (2,400,000)
Depreciation Expense (1,400,000)
EBIT or NOI 9,000,000
Interest Expense (1,140,000)
Taxable Income 7,860,000
 Income tax rate tax payment
$50,000 x .15 = $ 7,500
$25,000 x .25 = 6,250
$25,000 x .34 = 8,500
$235,000 x .39 = 91,650
$7,525,000 x .34 = 2,558,500
Total Tax payment $2,672,400

short cut: $7,860,000 x .34 = $2,672,400

 Financial Ratios
 As an Analysis tools (i.e. to interpret and
evaluate firm’s performance)
 Ratios are used to highlight weaknesses and
strengths.
 Based on Financial Statement
 Users (i.e. Managers, investors, or interested
parties )
 Ratios standardize numbers and facilitate
comparisons.
 Financial Ratios
 Two ways to interpret :

1- Time Series/horizontal analysis (internal

comparison) - use different accounting years in
the analysis using the same company in the
comparison.
2- Cross-sectional/vertical analysis (external
comparison) - use the same accounting year
but compare one firm with another firm in same
company (e.g. company ACER and HP). Also
known as “Trend Analysis”.
Why are ratios useful?
 Ratio comparisons should be made through
time and with competitors.
 Trend analysis.
 Peer (or industry) analysis.

3-40
 Financial Ratios (cont..)
 Group into 5 categories
 Liquidity ratios (i.e. how liquid the firms to meet
short-term obligation)
 Activity ratios (i.e. to measure efficiency of assets
to generate sales)
 Leverage ratios (i.e. how firms finance its assets,
to determine the capital structure)
 Profitability ratios (i.e. measure the efficiency of
firms to generate profit)
 Market ratios (i.e. measure the return on
investment for shareholders)
Five Major Categories of Ratios and the
Questions They Answer

 Liquidity: Can we make required payments?

 Asset management: right amount of assets vs.
sales?
 Debt management: Right mix of debt and
equity?
 Profitability: Do sales prices exceed unit costs,
and are sales high enough as reflected in PM,
ROE, and ROA?
 Market value: Do investors like what they see
as reflected in P/E and M/B ratios?
3-42
 Financial Ratios (cont..)

Liquidity Ratios
Current Assets
Current Ratio = Current Liabilities
Answer in X, higher ratio reflect the ability to pay its short term
obligations on time

Quick Ratio = Current Asset - Inventory

Current Liabilities
Answer in X, higher ratio reflect the ability to pay its short term
obligations without rely on inventories
 Financial Ratios (cont..)

Liquidity Ratios
Net Working = CA - CL
Capital
Answer in $, higher (i.e. positive value), absolute measure in liquidity
 Financial Ratios (cont..)
Activity Ratios
Inventory COGS or Sales
Turnover = Inventory
Answer in X, higher ratio reflect the effectiveness of inventory to
generate sales
Average A/c Receivables
Collection Period = Daily Sales
Answer in Days, higher ratio indicates that firm has problem in
collecting debt
 Financial Ratios (cont..)
Activity Ratios

A/C Receivable Sales

Turnover = A/C Receivable
Answer in X, higher ratio reflect the effectiveness in collecting
receivables
 Financial Ratios (cont..)
Activity Ratios
Fixed Assets Sales
Turnover = Fixed Assets
Answer in X, higher ratio reflect the effectiveness of fixed assets to
generate sales
Sales
Total Assets = Total Assets
Turnover
Answer in X, higher ratio reflect the effectiveness of total assets to
generate sales
 Financial Ratios (cont..)
Leverage or Solvency Ratios
Debt Total Debt
Ratio = Total Assets
Answer in %, higher ratio reflect the higher amount of debt to finance
assets
Debt to Total Debt
Equity = Equity
Answer in %, higher ratio reflect the higher amount of debt (i.e.
capital structure
 Financial Ratios (cont..)
Leverage or Solvency Ratios
Time Interest EBIT
Earned = Interest
Answer in X, higher ratio indicates that firm can meet loan
requirement and lower risk of default
 Financial Ratios (cont..)
Profitability Ratios
Gross Profit Gross Profit
Margin = Sales
Answer in %, higher ratio indicates higher contribution margin

Operating Operating Profit (EBIT)

Profit Margin = Sales
Answer in %, higher ratio indicates better productivity (i.e. operations)
 Financial Ratios (cont..)
Profitability Ratios
Net Profit Earnings After Tax
Margin = Sales
Answer in %, higher ratio indicates better income to shareholders

Return On Earnings After Tax

Assets = Total Assets
Answer in %, higher ratio indicates higher return on firm’s investment
 Financial Ratios (cont..)
Profitability Ratios

Return On = Earnings After Tax

Equity Total Equity

Answer in %, higher ratio indicates higher return to shareholders

 Financial Ratios (cont..)
Market/Equity Ratios
Earning Earnings After Tax
Per Share = No. of common shares
Answer in $, higher ratio indicates better income per share

Price to Market Price p/share

= EPS
Earnings
Answer in X, higher ratio indicates the firm’s market price is
overvalued
Income Statement for the year ended December 31, 2003

Financial Ratio Analysis

RM'000
Revenue/Net Sales 1500
less: COGS 450
Gross Profit 1050
less: Operating Expenses 450
Other operating expenses 300
Operating Income(EBIT) 300

plus: other income none

less: Interest 25
Earnings Before Taxes 275
less: Corporate Taxes (40%) 110
Net Income 165
less: Dividend- Preferred none
Common 33
Retained Earnings 132
 Financial Ratio Analysis (cont..)
Balance Sheet as at December 31, 2000 &2003

ASSETS 2003 LIABILITIES AND EQUITIES 2003

Current Assets Current Liabilities
Cash 12 Account Payable 38
Account Receivable 44 Notes Payable 35
Inventories 82 Accruals 6
Prepaid expenses 8 Total Current Liabilities 79
Total Current Assets 146

Fixed Assets Long Term Debt 180

Plant and Machinery 170
Land and Buildings 450 Common Equity
Total Fixed Assets 620 Common Stock 100
Preferred Stock 150
Retained Earnings 257

TOTAL ASSETS 766 TOTAL LIABILITIES AND EQUITY 766

 Liquidity Ratios
Liquidity Ratios 2003 Industry
1) Current ratio (times)

Current Assets 146 1.85 2X

Current Liabilities 79

2) Quick ratio (times)

Current Assets- Inventories 146 - 82 0.81 1.2X

Current Liabilities 79

3) Net working Capital

Current Asset - Current Liablities 146 - 79 67.00 none

 Profitability Ratios
Profitability Ratios 2003 Industry

1) Return on Equity (%)

Earning after tax 165 32.54 32%

Common Equity 507

2) Return on Asset(%)

Earnings after tax 165 21.54 45%

Total assets 766

3) Gross Profit Margin(%)

Gross Profit 1050 70.00 65%

Sales 1500

4) Operating Margin(%)

Operating Income 300 20.00 30%

Sales 1500

5) Net Profit Margin(%)

Net Profit 165 11.00 9%

Sales 1500
 Activity Ratios
Activity Ratio 2003 Industry

1) Asset Turnover (times/yr)

Sales 1500 1.96 5X

Total Assets 766

2) A/c Receivables Turnover (times/yr)

Sales 1500 34.09 40X

A/c Receivables 44

3) Average Collection Period (days)

A/c Receivables 44 10.22 6 days

Daily Sales (1550/360)

4) Inventory Turnover (times/yr)

COGS or Sales 1500 18.29 20X

Inventory 82

5) Fixed Assets Turnover

Sales 1500 2.42 none

Fixed Assets 620
 Leverage or Solvency Ratios
Leverage (Solvency) Ratio 2003 Industry

1) Debt Ratio

Total Debt 259 33.81 30%

Total Assets 766

2) Debt to Equity

Total Debt 259 51.08 50%

Equity 507

3) Time Interest Earned (time)

EBIT 300 12.00 10X

Interest 25
Basic Sources & Uses of Funds
❑ Is a Statement of changes in financial
position (i.e. Balance Sheet items)
❑ The changes of financial position represent
the Sources and Uses of funds for
investment purpose
❑ Questions:
 Where did firms get its funds during the year?
 What did the firm do with available funds?
 How does operations affect firm’s assets and
liabilities?
Basic Sources & Uses of Funds
Funds Flow Statement / Statement
of Changes in Financial Position
❑ Combine changes in B/Sheet with
other relevant financial figures (i.e.
income statement)
 Funds inflow – Sources
 Funds outflow – Uses

Total Sources of Funds = Total Uses of Funds

Funds Flow Statement (cont..)
How to Identify Sources and Uses of Funds
Sources of Funds Uses Of Funds
 Decrease in Asset  Increase in Asset
 Increase in Liability &  Decrease in Liability &
Equity Equity
 EAT/Net profit  Net loss from operations
 Depreciation  Dividend Paid
 Sales of stock  Purchase of raw materials/
Retirement of share
Funds Flow Statement (cont..)

Sources of Funds Explanation

Decrease in assets When an assets is sold by a firm,
cash from sales will be included
as a cash inflow
Increase in Liability When a company borrows money
from external sources it will then
increase the funds in the firm.
Net profit after tax Fund increased as profits from the
firm’s operations increase
Sales of stocks Selling of stock is a means for
firms to generate fund externally.
Funds Flow Statement (cont..)

Uses of Funds Explanation

Decrease in liability Use fund to pay off the deal will
decrease cash flows o a firm
Increase in Assets Fund will be used to pay the
purchased of an assets
Purchase/ Retirement Fund will be used for the
purchased of raw materials or
retirement of share
Cash dividend paid Fund will be used to pay dividend
to the shareholders
 Mekar Inc Bhd
Balance Sheet as at 31 December 20X1 and 20X2
(RM'000) 20X1 20X2
Current Assets
Cash 28 97
Marketable Securities 42 10
Account Receivable 93 128
Inventories 65 85
Total Current Assets 228 320

Fixed Assets
Gross Fixed Assets 887 1020
less: depreciation 226 285 To Analyze the
Total Fixed Assets 661 735 Balance Sheet (BS),
TOTAL ASSETS 889 1,055
Two BS is required
Current Liabilities
Account Payable 64 95
Notes Payable 20 87
Accrued Expenses 95 75
Total Current Liabilites 179 257

Long Term Debt 297 318

Common Equity
Common Stock 140 160
Paid in capital 108 120
Retained Earnings 165 200
TOTAL LIABILITIES AND EQUITY 889 1,055
 Analyze Income Statement

Mekar Inc Bhd

Income statement for the year ended 31 December 20X2
Dividend is
(RM'000) 20X2 Transferred to the
Revenue/Net Sales 960 Fund Flow
less: COGS 624 Statement
Gross Profit 336
less: Operating Expenses 167
Depreciation 19
Operating Income/EBIT 150
less: Interest Expenses 30
Earnings Before Taxes 120
less: Corporate Taxes 48
Net Income 72
less: Dividend 37
Retained Earnings 35

BUT
If there is no IS
Div = EAT- (RE1-RE0)
 Mekar Inc Bhd
Analysis for Funds Flow Statement for the year ended 31 Dec 20X2
(RM'000) 20X1 20X2 X2-X1 S/U
Current Assets
Cash 28 97 69 U
Marketable Securities 42 10 -32 S
Account Receivable 93 128 35 U
Inventories 65 85 20 U
Total Current Assets 228 320
All the items in
Fixed Assets
Gross Fixed Assets 887 1020 133 U
BS need to be
less: depreciation 226 285 59 S subtracted, X2-X1
Total Fixed Assets 661 735
TOTAL ASSETS 889 1,055
And then transfer
To Funds Flow
Current Liabilities
Account Payable 64 95 31 S
Statement
Notes Payable 20 87 67 S Except
Accrued Expenses 95 75 -20 U Retained Earnings
Total Current Liabilites 179 257
(GFA and Dep)
Long Term Debt 297 318 21 S

Common Equity
Common Stock 140 160 20 S
Paid in capital 108 120 12 S
Retained Earnings 165 200 35 NA
TOTAL LIABILITIES AND EQUITY 889 1,055
 Mekar Inc Bhd
Funds Flow Statement for the year ended 31 Dec 20X2
(RM'000)
Sources of Funds
Funds from operations Depreciation:
EAT 72 Extract from IS
a
Depreciation 19
Total Funds from operations 91 or
(Take the difference in BS)
Proceeds from the sale of:
New long-term debt 21
New common stock 20
New paid in capital 12
Total sources from long term funds 53

Proceeds from changes of WC “Parenthesis”

Sale in short-term securities 32 If there is no IS
Increase in acc payables 31
Increase in notes payables 67 available
Total sources from short-term funds 130
Total sources of funds 274

Uses of Funds
Long-term uses of funds
Net capital expenditureb 93
Net Capex:
Dividend 37 Net FA1 – Net FA0+ Dep
Total uses of long-term funds 130
or
Changes in WC (Gross FA1 – Gross FA0 )
Increase in cash 69
Increase Account Receivable 35
Increase in Inventories 20
Decrease in misc liabilities 20
Total uses of short-term funds 144
Total uses of funds 274
 Statement of Cash flows

 Summarizes the inflows and outflows of Cash

Transactions for the year
 To reconcile all the cash transactions
 Cash might be changed due to changes
Balance Sheet items (i.e. assets, liabilities and
equity)
 In fact, Cash is an item in Balance Sheet
 So, Cash in Cash Flow Statement must be
equaled with Cash in Balance Sheet
 Cash Flow Statement (cont…)

Statement of cash flows is separated into 3 main

Categories:
 Operating activities, which includes net
income, deprecation, changes in current asset
and current liabilities (except Cash, short-term
investment and Notes payable)
 Investing activities, changes in fixed assets
 Financing activities, changes in short-term
investment, notes payable, equity, long-term
debt, dividends payment,
 XXX Bhd
Statement of Cash Flows for 200X1
Operating Activities
Net Income XXX
plus: Depreciation XXX
Due to changes in working capital:
Changes in CA or CL XXX The changes of Items
EXCEPT CASH,NOTES PAYABLE In the
AND S/TERM INVESTMENT
Balance Sheet
Net cash provided by operating activities XXXX
Will be transferred
Long-term Investing Activities Into the
Changes in Fixed Assets XXXX Statement of Cashflow
(i.e. the procedure is
Financing Activities Similar to determine
Changes in Stocks, L/term Debt,
S/term Investment, Notes Payable XXX
Sources and Uses
Of Funds)
Dividends XXX
Net cash provided by operating activities XXXX

Summary
Net change in cash XXXX
Cash at the beginning of year XXXX
Cash at the ending of year XXXX
Example
Suria Bhd
Consolidated Balance Sheet (RM'000)
2004 2003
Cash 10,000 15,000
Marketable securities 0 65,000
Account Receivable 375,000 315,000
Inventories 615,000 415,000
Total Current Assets 1,000,000 810,000
Net Fixed Assets 1,000,000 870,000
TOTAL ASSETS 2,000,000 1,680,000

Account Payable 60,000 30,000

Notes Payable 110,000 60,000
Accrued Expenses 140,000 130,000
Total Current Liabilities 310,000 220,000
Long-term Debt 754,000 580,000
Common Stock 170,000 170,000
Retained Earnings 766,000 710,000
TOTAL LIABILITIES AND EQUITY 2,000,000 1,680,000
Example
Suria Bhd
Income Statement for the year ended (RM'000)
2004 2003
Sales 3,000,000 2,850,000
less: Operating Expenses 2,616,200 2,497,000
Depreciation 100,000 90,000
Operating Income/EBIT 283,800 263,000
Prepare the
less: Interest Expenses 88,000 60,000 Statement
Earnings Before Taxes 195,800 203,000 of Cash flow
less: Corporate Taxes (40%) 78,320 81,200
Net Income 117,480 121,800
Dividend to Shareholders 61,480 57,000
Retained Earnings 56,000 64,800
 Items in
Solution BS need to be
subtracted, X1-X0
Suria Bhd And then transfer
Consolidated Balance Sheet (RM'000)
2004 2003 X1-X0 Action
To Cash Flow
Cash 10,000 15,000 Statement
Marketable securities 0 65,000 -65,000 Add
Account Receivable 375,000 315,000 60,000 Minus
Except
Inventories 615,000 415,000 200,000 Minus Cash & RE
Total Current Assets 1,000,000 810,000
Net Fixed Assets 1,000,000 870,000 130,000 Minus
TOTAL ASSETS 2,000,000 1,680,000
The Procedure
Account Payable 60,000 30,000 30,000 Add
Notes Payable 110,000 60,000 50,000 Add
Is similar
Accrued Expenses 140,000 130,000 10,000 Add To determine
Total Current Liabilities 310,000 220,000
Long-term Debt 754,000 580,000 174,000 Add
Sources (i.e. Add)
Common Stock 170,000 170,000 0 N/A and
Retained Earnings 766,000 710,000 Uses (i.e. Minus)
TOTAL LIABILITIES AND EQUITY 2,000,000 1,680,000
Of Funds
Solution (cont..)
Suria Bhd
Income Statement for the year ended (RM'000)
2004 2003
Sales 3,000,000 2,850,000
less: Operating Expenses 2,616,200 2,497,000
Dividend (i.e. Minus)
Depreciation 100,000 90,000 and
Operating Income/EBIT 283,800 263,000 Depreciation (i.e. Add)
less: Interest Expenses 88,000 60,000 Are transferred to
Earnings Before Taxes 195,800 203,000 Cash Flow
less: Corporate Taxes (40%) 78,320 81,200 Statement
Net Income 117,480 121,800
Dividend to Shareholders 61,480 57,000
Retained Earnings 56,000 64,800
 Suria Bhd
Statement of Cash Flows for 2004 (RM'000)

Operating Activities Depreciation:

Net Income 117,480 Extract from IS
plus: Depreciation 100,000
Due to changes in working capital:
or
Increase in account receivable (60,000) (Take the difference in BS)
Increase in inventories (200,000)
Increase in account payable 30,000
Increase in accruals 10,000
Net cash provided by operating activities (2,520)
Net Capex:
Long-term Investing Activities Net FA1 – Net FA0+ Dep
Cash used to acquire fixed assets (230,000) or
(Gross FA1 – Gross FA0 )
Financing Activities
Sale of short-term investment 65,000
Increase in notes payable 50,000
Increase in long-term debt 174000
Dividends (61,480) Ending Cash:
Net cash provided by operating activities 227,520 Same Amount with
Cash in the
Summary
Balance Sheet
Net change in cash (5,000)
Cash at the beginning of year 15,000
Cash at the ending of year 10,000