Review the fictitious company Balance Sheet in Chapter 2: Table 2.1 in the textbook and Income Statement in Chapter 2: Table 2.2 based on a fictitious company. What do you believe the significance of each of these is for financial management? Why did you answer the way you did? 26PART 1Overview of Corporate FinanceTABLE 2.2U.S. CORPORATIONIncome Statement2018 Income Statement($ in millions)Net sales$1,509Cost of goods sold750Depreciation65Earnings before interest and taxes$ 694Interest paid70Taxable income$ 624Taxes (21%)131Net income$ 493Dividends$123Addition to retained earnings370 Chapter 2Financial Statements, Taxes, and Cash FlowU.S. CORPORATIONТАBLE 2.12017 and 2018 Balance SheetsBalance Sheets($ in millions)AssetsLiabilities and Owners' Equity2017201820172018Current assetsCurrent liabilitiesCash$ 104$ 221Accounts payable$ 232$ 266Accounts receivable455688Notes payable196123Inventory553555Total$ 428$389Total$1,112$1,464Fixed assets$ 408$ 454Net plant andequipmentLong-term debt$1,644$1,709Owners' equityCommon stock andpaid-in surplus600640Retained earnings1,3201,690Total$1,920$2,330Total liabilities andTotal assets$2,756$3,173owners' equity$2,756$3,173

Analysis of financial statement is an important task for the financial management. It is done in…

Review the fictitious company Balance Sheet in Chapter 2: Table 2.1 in the textbook and Income Statement in Chapter 2: Table 2.2 based on a fictitious company. What do you believe the significance of each of these is for financial management? Why did you answer the way you did?

Review the fictitious company Balance Sheet in Chapter 2: Table 2.1 in the textbook and Income Statement in Chapter 2: Table 2.2 based on a fictitious company. What do you believe the significance of each of these is for financial management? Why did you answer the way you did?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Review the fictitious company Balance Sheet in Chapter 2: Table 2.1 in the textbook and Income Statement in Chapter 2: Table 2.2 based on a fictitious company.

What do you believe the significance of each of these is for financial management?
Why did you answer the way you did?

26
PART 1
Overview of Corporate Finance
TABLE 2.2
U.S. CORPORATION
Income Statement
2018 Income Statement
($ in millions)
Net sales
$1,509
Cost of goods sold
750
Depreciation
65
Earnings before interest and taxes
$ 694
Interest paid
70
Taxable income
$ 624
Taxes (21%)
131
Net income
$ 493
Dividends
$123
Addition to retained earnings
370

Chapter 2
Financial Statements, Taxes, and Cash Flow
U.S. CORPORATION
ТАBLE 2.1
2017 and 2018 Balance Sheets
Balance Sheets
($ in millions)
Assets
Liabilities and Owners' Equity
2017
2018
2017
2018
Current assets
Current liabilities
Cash
$ 104
$ 221
Accounts payable
$ 232
$ 266
Accounts receivable
455
688
Notes payable
196
123
Inventory
553
555
Total
$ 428
$389
Total
$1,112
$1,464
Fixed assets
$ 408
$ 454
Net plant and
equipment
Long-term debt
$1,644
$1,709
Owners' equity
Common stock and
paid-in surplus
600
640
Retained earnings
1,320
1,690
Total
$1,920
$2,330
Total liabilities and
Total assets
$2,756
$3,173
owners' equity
$2,756
$3,173

Approach to decide on the efficient procurement and investment of funds for the day-to-day operations of a business. Financial management aims at profit maximization, and it includes financing and capital budgeting.

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