1 FS analyses cash flows taxes

FINANCIAL STATEMENTS Income Statement revenues, expenses, net income Balance Sheet snapshot of assets, liabilities, equity Statement of Cash Flows supposedly "reconciles" the income statement and ba (incoming and outgoing cash flows from operations, in Statement of Stockholders' Equity how much of the net income went to retained earning market value vs. "cost" or "book" value THE ACCOUNTING EQUATION: assets = liabilities + owners equity accounting liquidity - convert assets to cash w/o significant loss of value debt vs. equity (briefly) - different rights, responsibilities, payoffs to stakeholders current vs. long-term assets and liabilities cash flow more important (to finance people) than net income working capital fixed assets financing - equity, debt investing - fixed (productive) assets operations - the day job MVA Market value added = market price of equity - "book" value of equity EVA Economic value added = after tax operating income - cost of capital need to produce the income TAXES CORPORATE fed rate: flat 21% state tax? interest deduction portion of dividends received excluded INDIVIDUAL progressive tax; personal exclusions, family structure, tax code incentivizes certain behaviors marginal rate (tax 'bracket') vs actual (average) rate

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formula text =F18-F13-F14 Q1 bilities of $1,365, and long term debt of $4,010.

Income Statement formula Sales $795,000 COGS $345,000 Depreciation $76,000 EBIT $374,000 =E14-E15-E16 Q1 Interest Expense $41,000 Taxable Income $333,000 =E17-E18 Taxes $69,930 =E19*E26 Net Income $263,070 =E19-E20 Q2 Dividends $26,307 =E21*E27 Change to RE $236,763 =E21-E23 Q3 tax rate 21% dividend payout 10% Brandsy, Inc. has sales of $795,000, COGS of $345,000, depreciation expense of $76,000, i Build the income statement and answer the following: 1. What is the EBIT? $374,000 2. What is the firm's net income? $263,070 3. If the firm has a policy of paying 10% of net income to shareholders as a dividend, what

Constructing the income statement: Income Statement, Joe's Construction formula Sales $2,600,000 COGS $1,535,000 Other expenses $465,000 Depreciation expense $520,000 EBIT $80,000 =D15-D16-D17-D18 Interest expense $245,000 Taxable income -$165,000 =D19-D20 Taxes $0 Q1 Net Income -$165,000 =D21 Q2 OCF: $600,000 =D15-D16-D17-D22 Q3 This past year Joe's Construction Supplies Co. had sales of $2.6 million. Cost of goods sold total In addition, the company booked $520,000 in depreciation expenses. Interest expenses were $ does not have any tax carry forward/back. 1. What is the firm's net income? $(165,000) 2. What was the cash flow from operations? $600,000 3. Explain more about the situtaion. What is doing on here? The difference is based on the percieved lost value of assets (depreciation). This is meaningless from a cash perspective, but necessary to estimate the value of assets. Finance people are more interested in cash flows than net income. This is a good example of why. Net income was negative but cash flows from operations was positive because of a large depreciation charge. Depreciation is not a cash item.

led $1.535 million. Administrative costs were $465,000. $245,000. The company's tax rate is 21%. The company

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Sally's income: $155,000 U.S. personal income tax rate Sally's taxes Tax rate Single filer Married filing jointly Bracket Bracket $ Tax paid formula G 10% up to $9,700 up to $19,400 $9,700 $9,700 $970 =F12 12% $9,701 to $39,475 $19,401 to $78,950 $39,475 $29,775 $3,573 =F13-F12 22% $39,476 to $84,200 $78,951 to $168,400 $84,200 $44,725 $9,840 =F14-F13 Q2 24% $84,201 to $160,725 $168,401 to $321,450 $160,725 $70,800 $16,992 =G9-F14 32% $160,725 to $204,100 $321,451 t0 $408,200 $204,100 35% $204,101 to $510,300 $408,201 to $612,350 $510,300 37% $510,301 and above $612,351 and above formula Q1 total tax paid: $31,375 =SUM(H12:H18) Q3 average tax rate: 20.24% =H19/G9 Sally Forth, a young corporate lawyer, had a taxable income last year of $155,000. 1. How much did she pay in taxes? $31,375 2. What is her marginal tax rate? 24% 3. What is her average tax rate? 20.24%