Transcript Summay with a real world example

Applications
Chapter 1 - Applications
This lecture is part of Chapter 1:
The Basic Financial Statements
Today’s Lecture
A short review of the three basic financial statements
A look at some real financial statements as they can be
found on the web
A short review of the numerical methods used
A short Review
What do the three basic financial statements tell us?
•Income Statement:
Whether the company is profitable
•Balance Sheet:
Whether the company is worth something
•Cash Flow Statement:
Whether the company has money to continue its
business.
A short Review
Income Statement
Lists Revenues and Expenses like:
• Sales
• Interest
• Royalties
• Cost of Goods sold
• Wages
• Depreciation
• Interest
And gives the net income by summing things up
A short Review
Balance Sheet
Lists Assets and Liabilities like:
• Cash
• Accounts Receivable
• Inventory
• Accounts Payable
• Debts
• Common Stock
• Retained Earning
And makes sure that Assets and Liabilities balance.
A short Review
Cash Flow Statement
Lists Sources and Uses of cash:
• Payments from Customers
• Issuance of Debt
• Sale of Plant and Equipment
• To Suppliers
• To Employees
• Purchase of new Equipment
• Payment of Long Term Debt
And give the net change in Cash.
The Web
The Web is incredibly useful when it comes to
financial resources.
One reason being the popularity of online brokers.
Let’s have a look at some web sites:
http://quote.yahoo.com/
http://quote.com/quotecom/
http://cnnfn.cnn.com/
Of course there are many more … but the basic info is
usually quite similar.
Quote.com
Yahoo Finance
SEC
All these web sites provide a wealth of information about
companies.
In the US all publicly listed companies need to regularly
disclose critical financial (and other) information to the
SEC (Securities and Exchange Commission)
http://www.sec.gov/ .
The information relevant to this chapter is conveniently
accessed through any of the previously mentioned sites.
Let us use Yahoo for the moment.
Finding Information
Go to http://quote.yahoo.com/
Type a ‘g’ here (without the quotes). This is the socalled ticker symbol for Gillette.
Finding Information
Finding data on http://quote.yahoo.com/
This is how is looks after typing the ‘g’. Press on the
button to the right called ‘Get Quotes’.
Finding Information
Finding data on http://quote.yahoo.com/
This will lead to a page with the table below. Click on
‘Profile’ under ‘More Info’.
Finding Information
Finding data on http://quote.yahoo.com/
This will lead to a page with a synopsis of what the
company does and with some very basic financial
information. The link we are intersted in at the moment
is: ‘Financials’. Let’s click on it.
Finding Information
Finding data on http://quote.yahoo.com/
This will lead to a page with links to the Balance Sheet,
Cash Flow Statement and the Income Statement.
Balance Sheet
Cash Flow Statement
Income Statement
Numerical Methods
Mainly additions and subtractions in Excel.
Use fonts, style, etc. to clearly present the data.
Since it is generally better to have the three financial
statement on separate worksheets, it is important to know
how to refer to a cell on another worksheet.
E.g. to refer to cell A1 on the worksheet Sheet1: Use
‘Sheet 1’!A1
Name of the worksheet
(must be in single quotes if
the name contains spaces)
Name of the cell
Exclamation Mark
Key Points of the Day
It is imperative to know what the three basic financial
statements are about/for.
The three basic financial statement for many (if not most)
US listed companies can readily be found on the web.
The actual financial statements for Gillette can indeed
almost entirely be understood by the material covered in
this chapter.
Hey! This is remarkably useful and not very difficult!