Bus 251 Midnight Version
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Bus 251 Midnight Version

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Bus 251 Midnight Version Bus 251 Midnight Version Presentation Transcript

  • Teck Resources limited:
    The Cash flow Statement
    June Kim & Cora Lam
    BUS 251Financial Accounting I
  • Amortization
    An artificial decrease in the value of equipment
    Non-cash item
    Subtracted in the income statement
    So, why is the amortization amount added to cash?
    To add back the subtracted amount
    i.e. un-subtracting
  • Income Statement
    Cash flow Statement
    Operating Performance
    Vs.
    Accrual
    Cash-based
  • Net Earnings from Continued Operations
    Decreased
    BAD NEWS
  • Overall cash flow from operating activities
    Increased
    GOOD NEWS
  • Which determines performance?
  • Net Earnings
    Overall Cash Flow
    Increases
    with revenue
    Decreases
    with amortization
    with asset impairment
    with taxes payable
    Increases
    with revenue
    Decreases
    with new cash equipment purchases
    with tax payments
    Operating Performance
  • In Detail
    A decrease in[Net earnings from continued operations]is caused by
    More operating expenses
    More amortization/asset impairment
    An increase in [Overall cash flow from operating activities]implies
    Net income is not manipulated
  • So what?
    Performance: Net income = Revenue – Expense
    A decrease? BAD NEWS!
    Less ROI: less attractive to shareholders
    POSITIVE cash flow from operations
    GOOD NEWS!
    Higher Liquidity
  • In General…
    In the long-run, Net income = Cash flow
    But in the short-term, Net income ╪ Cash flow
    Positive correlation
  • Financing
  • Financing: Debt
    Issuance of debt
    Company borrowing money
    Liability account
    Decreases net income
    No cash flow(yet), so should be an increase in cash flow statement
    Separate information for description
    Magnitudes are not minimized
    How much money borrowed and how much money lent
    Shows a measure of expansion of equity
  • Financing: Debt (cont.)
    Separated information of Issuance and Repayment
    Magnitudes are not minimized
    How much money borrowed and how much money lent
    Shows a measure of expansion of equity
    Why separate?
    To be more descriptive
    i.e. information is not filtered by aggregating
  • Investing: Property, Plant and Equipment
  • Negative Property?
  • CHANGE in Property, Plant and Equipment
    Looking at the balance sheet
  • CHANGE in Property, Plant and Equipment
    Negative cash -> Cash out -> They Spent Cash.
    On the Acquisition of Fording Canadian Coal Trust
    Overall increase in new equipment purchases
    Bought more equipment than was amortized
    Buying a new mine
    Bought more equipment than used
  • Q?