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Bahan Mata Kuliah Pengantar Akuntansi 2 - Usakti

Bahan Mata Kuliah Pengantar Akuntansi 2 - Usakti
Financial Accounting IFRS ed. Kieso & Weygand

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Pengantar Akuntansi 2 - Ch13 Statement of Cash Flow Pengantar Akuntansi 2 - Ch13 Statement of Cash Flow Presentation Transcript

  • Chapter 13 Statement of Cash Flows Financial Accounting, IFRS Edition Weygandt Kimmel Kieso Slide 13-1
  • Study Objectives 1. Indicate the usefulness of the statement of cash flows. 2. Distinguish among operating, investing, and financing activities. 3. Prepare a statement of cash flows using the indirect method. 4. Analyze the statement of cash flows. Slide 13-2
  • Statement of Cash Flows The Statement of Cash Flows: Usefulness and Format Preparing the Statement of Cash Flows—Indirect Method Usefulness Classifications Step 1: Operating activities Significant non-cash activities Step 2: Investing and financing activities Format Step 3: Net change in cash Preparation Indirect and direct methods Slide 13-3 Using Cash Flows to Evaluate a Company Free cash flow
  • Usefulness and Format Usefulness of the Statement of Cash Flows Provides information to help assess: 1. Entity’s ability to generate future cash flows. 2. Entity’s ability to pay dividends and obligations. 3. Reasons for difference between net income and net cash provided (used) by operating activities. 4. Cash investing and financing transactions during the period. Slide 13-4 SO 1 Indicate the usefulness of the statement of cash flows.
  • Usefulness and Format Classification of Cash Flows Operating Activities Income Statement Items Slide 13-5 Investing Activities Generally Non-Current Asset Items Financing Activities Generally Non-Current Liability and Equity Items SO 2 Distinguish among operating, investing, and financing activities.
  • Classification of Cash Flows Types of Cash Inflows and Outflows Slide 13-6 Illustration 13-1 SO 2 Distinguish among operating, investing, and financing activities.
  • Classification of Cash Flows Types of Cash Inflows and Outflows Slide 13-7 Illustration 13-1 SO 2 Distinguish among operating, investing, and financing activities.
  • Classification of Cash Flows Types of Cash Inflows and Outflows IFRS requires that the following amounts be disclosed:  Cash paid for taxes.  Cash received and paid from interest and dividends. Illustration 13-2 Daimler’s statement of cash flows note Slide 13-8 SO 2 Distinguish among operating, investing, and financing activities.
  • Usefulness and Format Significant Non-Cash Activities 1. Direct issuance of ordinary shares to purchase assets. 2. Conversion of bonds into ordinary shares. 3. Direct issuance of debt to purchase assets. 4. Exchanges of plant assets. Companies report these activities in either a separate note or supplementary schedule to the financial statements. Slide 13-9 SO 2 Distinguish among operating, investing, and financing activities.
  • Slide 13-10
  • Usefulness and Format Format of the Statement of Cash Flows Order of Presentation: Direct Method 1. Operating activities. 2. Investing activities. Indirect Method 3. Financing activities. The cash flows from operating activities section always appears first, followed by the investing and financing sections. Slide 13-11 SO 2 Distinguish among operating, investing, and financing activities.
  • Format of the Statement of Cash Flows Illustration 13-3 Slide 13-12 SO 2 Distinguish among operating, investing, and financing activities.
  • Format of the Statement of Cash Flows During its first week, Hu Na Company had these transactions. Classification 1. Issued 100,000 HK$50 par value ordinary shares for HK$8,000,000 cash. 2. Borrowed HK$2,000,000 from Castle Bank, signing a 5-year note bearing 8% interest. Financing 3. Purchased two semi-trailer trucks for HK$1,700,000 cash. Investing 4. Paid employees HK$120,000 for salaries and wages. Operating 5. Collected HK$200,000 cash for services provided. Slide 13-13 Financing Operating SO 2 Distinguish among operating, investing, and financing activities.
  • Usefulness and Format Preparing the Statement of Cash Flows Three Sources of Information: 1. Comparative statement of financial position 2. Current income statement 3. Additional information Slide 13-14 SO 2 Distinguish among operating, investing, and financing activities.
  • Usefulness and Format Three Major Steps: Slide 13-15 Illustration 13-4 SO 2 Distinguish among operating, investing, and financing activities.
  • Usefulness and Format Three Major Steps: Slide 13-16 Illustration 13-4 SO 2 Distinguish among operating, investing, and financing activities.
  • Usefulness and Format Indirect and Direct Methods Companies favor the indirect method for two reasons: 1. Easier and less costly to prepare, and 2. Focuses on the differences between net income and net cash flow from operating activities. Slide 13-17 SO 2 Distinguish among operating, investing, and financing activities.
  • Slide 13-18
  • Preparing the Statement of Cash Flows Illustration Illustration 13-5 Indirect Method Slide 13-19 SO 3 Prepare a statement of cash flows using the indirect method.
  • Preparing the Statement of Cash Flows Indirect Method Illustration 13-5 Slide 13-20 SO 3 Prepare a statement of cash flows using the indirect method.
  • Preparing the Statement of Cash Flows Additional information for 2011: 1. The company declared and paid a $29,000 cash dividend. 2. Issued $110,000 of long-term bonds in direct exchange for land. 3. A building costing $120,000 and equipment costing $25,000 were purchased for cash. 4. The company sold equipment with a book value of $7,000 (cost $8,000, less accumulated depreciation $1,000) for $4,000 cash. 5. Issued ordinary shares for $20,000 cash. 6. Depreciation expense was comprised of $6,000 for building and $3,000 for equipment. Slide 13-21 SO 3 Prepare a statement of cash flows using the indirect method.
  • Preparing the Statement of Cash Flows Step 1: Operating Activities Indirect Method Determine net cash provided/used by operating activities by converting net income from an accrual basis to a cash basis. Common adjustments to Net Income (Loss): Add back non-cash expenses (depreciation and amortization expense). Deduct gains and add losses that resulted from investing and financing activities. Slide 13-22 Analyze changes in non-cash current assets and current liabilities. SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Question Which is an example of a cash flow from an operating activity? a. Payment of cash to lenders for interest. b. Receipt of cash from the sale of shares. c. Payment of cash dividends to the company’s shareholders. d. None of the above. Slide 13-23 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Depreciation Expense Although depreciation expense reduces net income, it does not reduce cash. Illustration 13-7 Slide 13-24 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Loss on Sale of Equipment Because companies report as a source of cash in the investing activities section the actual amount of cash received from the sale: Any loss on sale is added to net income in the operating section. Any gain on sale is deducted from net income in the operating section. Slide 13-25 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Loss on Sale of Equipment Computer Services’ income statement reports a $3,000 loss on the sale of equipment (book value $7,000, less $4,000 cash received from sale of equipment). Illustration 13-8 Slide 13-26 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts When the Accounts Receivable balance decreases, cash receipts are higher than revenue earned under the accrual basis. Illustration 13-9 Accounts Receivable 1/1/011 Balance Revenues 12/31/11 Balance 30,000 507,000 Receipts from customers 517,000 20,000 Therefore, the company adds to net income the amount of the decrease in accounts receivable. Slide 13-27 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts Illustration 13-10 Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on sale of equipment 3,000 Decrease in accounts receivable Net cash provided by operating activities Slide 13-28 10,000 $ 167,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts When the Inventory balance increases, the cost of merchandise purchased exceeds the cost of goods sold. Merchandise Inventory 1/1/11 Balance Purchases 12/31/11 Balance 10,000 155,000 Cost of goods sold 150,000 15,000 As a result, cost of goods sold does not reflect cash payments made for merchandise. The company deducts from net income this inventory increase. Slide 13-29 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts Illustration 13-10 Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on sale of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Net cash provided by operating activities Slide 13-30 $ 162,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts When the Prepaid Expense balance increases  Cash paid for expenses is higher than expenses reported on an accrual basis.  Company deducts the increase from net income to arrive at net cash provided by operating activities. If prepaid expenses decrease, reported expenses are higher than the expenses paid. Slide 13-31 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Asset Accounts Illustration 13-10 Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on sale of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Net cash provided by operating activities Slide 13-32 $ 158,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Liability Accounts When Accounts Payable increases  Company received more in goods than it actually paid for.  Increase is added to net income. When Income Tax Payable decreases  Income tax expense was less than the amount of taxes paid during the period.  Decrease is subtracted from net income. Slide 13-33 SO 3 Prepare a statement of cash flows using the indirect method.
  • Operating Activities Changes to Non-Cash Current Liability Accounts Illustration 13-11 Cash flows from operating activities: Net income $ 145,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 9,000 Loss on sale of equipment 3,000 Decrease in accounts receivable 10,000 Increase in inventory (5,000) Increase in prepaid expenses (4,000) Increase in accounts payable 16,000 Decrease in income taxes payable (2,000) Net cash provided by operating activities Slide 13-34 $ 172,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Preparing the Statement of Cash Flows Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method Slide 13-35 Illustration 13-12 SO 3 Prepare a statement of cash flows using the indirect method.
  • Step 2: Investing and Financing Activities From the additional information, the company purchased land of $110,000 by issuing long-term bonds. This is a significant noncash investing and financing activity that merits disclosure in a separate schedule. Land 1/1/11 Balance Issued bonds 12/31/11 Balance 20,000 110,000 130,000 Bonds Payable 1/1/11 20,000 110,000 12/31/11 Balance Slide 13-36 Balance For land 130,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities Partial statement Illustration 13-14 Net cash provided by operating activities Cash flows from investing activities: Purchase of building Purchase of equipment Sale of equipment Net cash used by investing activities Cash flows from financing activities: Issuance of ordinary shares Payment of cash dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period $ 20,000 (29,000) (9,000) 22,000 33,000 55,000 Disclosure: Issuance of bonds to purchase land Slide 13-37 172,000 $ 110,000 (120,000) (25,000) 4,000 (141,000) SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities From the additional information, the company acquired an office building for $120,000 cash. This is a cash outflow reported in the investing section. Building 1/1/11 Balance 40,000 Office building 120,000 12/31/11 Balance Slide 13-38 160,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities Partial statement Illustration 13-14 Net cash provided by operating activities Cash flows from investing activities: Purchase of building Purchase of equipment Sale of equipment Net cash used by investing activities Cash flows from financing activities: Issuance of ordinary shares Payment of cash dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period $ 20,000 (29,000) (9,000) 22,000 33,000 55,000 Disclosure: Issuance of bonds to purchase land Slide 13-39 172,000 $ 110,000 (120,000) (25,000) 4,000 (141,000) SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities The additional information explains that the equipment increase resulted from two transactions: (1) a purchase of equipment of $25,000, and (2) the sale for $4,000 of equipment costing $8,000. Equipment 1/1/11 Balance Purchase 12/31/11 Balance Journal Entry Slide 13-40 10,000 25,000 Equipment sold 8,000 27,000 Cash Accumulated depreciation Loss on sale of equipment Equipment 4,000 1,000 3,000 8,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Statement of Cash Flows Indirect Method Illustration 13-14 Slide 13-41 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on sale of equipment Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities Cash flows from investing activities: Purchase of building Purchase of equipment Sale of equipment Net cash used by investing activities Cash flows from financing activities: Issuance of ordinary shares Payment of cash dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period $ 145,000 9,000 3,000 10,000 (5,000) (4,000) 16,000 (2,000) 172,000 (120,000) (25,000) 4,000 (141,000) $ 20,000 (29,000) (9,000) 22,000 33,000 55,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities The additional information notes that the increase in share capital - ordinary resulted from the issuance of new shares. Ordinary Shares 1/1/11 Balance Shares sold 12/31/11 Balance Slide 13-42 50,000 20,000 70,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities Illustration 13-14 Partial statement Net cash provided by operating activities Cash flows from investing activities: Purchase of building Purchase of equipment Sale of equipment Net cash used by investing activities Cash flows from financing activities: Issuance of ordinary shares Payment of cash dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period $ 20,000 (29,000) (9,000) 22,000 33,000 55,000 Disclosure: Issuance of bonds to purchase land Slide 13-43 172,000 $ 110,000 (120,000) (25,000) 4,000 (141,000) SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities Retained earnings increased $116,000 during the year. This increase can be explained by two factors: (1) Net income of $145,000 increased retained earnings. (2) Dividends of $29,000 decreased retained earnings Retained Earnings 1/1/11 Dividends 29,000 Balance Net income 12/31/11 Balance Slide 13-44 48,000 145,000 164,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Statement of Cash Flows Indirect Method Step 3: Net Change in Cash Slide 13-45 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on sale of equipment Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in income taxes payable Net cash provided by operating activities Cash flows from investing activities: Purchase of building Purchase of equipment Sale of equipment Net cash used by investing activities Cash flows from financing activities: Issuance of ordinary shares Payment of cash dividends Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period Illustration 13-14 $ 145,000 9,000 3,000 10,000 (5,000) (4,000) 16,000 (2,000) 172,000 (120,000) (25,000) 4,000 (141,000) $ 20,000 (29,000) (9,000) 22,000 33,000 55,000 SO 3 Prepare a statement of cash flows using the indirect method.
  • Investing and Financing Activities Question Which is an example of a cash flow from an investing activity? a. Receipt of cash from the issuance of bonds payable. b. Payment of cash to repurchase outstanding shares. c. Receipt of cash from the sale of equipment. d. Payment of cash to suppliers for inventory. Slide 13-46 SO 3 Prepare a statement of cash flows using the indirect method.
  • Using Cash Flows to Evaluate a Company Free Cash Flow Free cash flow describes the cash remaining from operations after adjustment for capital expenditures and dividends. Slide 13-47 SO 4 Analyze the statement of cash flows.
  • Using Cash Flows to Evaluate a Company Illustration 13-16 Slide 13-48 SO 4 Analyze the statement of cash flows.
  • Understanding U.S. GAAP Key Differences Statement of Cash Flows Companies preparing financial statements under both IFRS and GAAP must prepare a statement of cash flows as an integral part of the financial statements. Both IFRS and GAAP require that the statement of cash flows should have three major sections—operating, investing, and financing—along with changes in cash and cash equivalents. Similar to IFRS, the cash flow statement can be prepared using either the indirect or direct method under GAAP. In both U.S. and international settings, most companies choose the indirect method for reporting net cash flows from operating activities. Slide 13-49
  • Understanding U.S. GAAP Key Differences Statement of Cash Flows The definition of cash equivalents used in GAAP is similar to that used in IFRS. A major difference is that in certain situations, bank overdrafts are considered part of cash and cash equivalents under IFRS, which is not the case in GAAP. Under GAAP, bank overdrafts are classified as financing activities. IFRS requires that non-cash investing and financing activities be excluded from the statement of cash flows. Non-cash investing and financing activities should be disclosed in the notes instead of in the financial statements. Under GAAP, companies may present this information at the bottom of the Slide 13-50 cash flow statement.
  • Understanding U.S. GAAP Looking to the Future Statement of Cash Flows Presently, the FASB and the IASB are involved in a joint project on the presentation and organization of information in the financial statements. One interesting approach, revealed in a published proposal from that project, is that in the future the income statement and statement of financial position would adopt headings similar to those of the statement of cash flows. That is, the income statement and statement of financial position would be broken into operating, investing, and financing sections. With respect to the cash flow statement specifically, the notion of cash equivalents will probably not be retained. That is, cash equivalents will not be combined with cash but instead will be reported as a form of highly continued Slide 13-51
  • Understanding U.S. GAAP Looking to the Future Statement of Cash Flows liquid, low-risk investments. The definition of cash in the existing literature would be retained, and the statement of cash flows would present information on changes in cash only. In addition, the FASB favors presentation of operating cash flows using the direct method only. However, the majority of IASB members express a preference for not requiring use of the direct method of reporting operating cash flows. So, the two Boards will have to resolve their differences in this area in order to issue a converged standard for the statement of cash flows. Slide 13-52
  • Using a Worksheet to Prepare the Statement of Cash Flows-Indirect Method Appendix A Illustration 13A-1 Slide 13-53 SO 5 Explain how to use a worksheet to prepare the statement of cash flows using the indirect method.
  • Using a Worksheet to Prepare the Statement of Cash Flows-Indirect Method Preparing a Worksheet 1. Enter in the statement of financial position accounts section the statement of financial position accounts and their beginning and ending balances. 2. Enter in the reconciling columns of the worksheet the data that explain the changes in the statement of financial position accounts other than cash and their effects on the statement of cash flows. 3. Enter the cash line and at the bottom of the worksheet the increase or decrease in cash. This entry should enable the totals of the reconciling columns to be in agreement. Slide 13-54 SO 5 Explain how to use a worksheet to prepare the statement of cash flows using the indirect method.
  • Using a Worksheet to Prepare the Statement of Cash Flows-Indirect Method Slide 13-55 Illustration 13A-3 Completed worksheet— indirect method
  • Statement of Cash Flows-Direct Method Appendix B 1. Under the direct method, companies compute net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. 2. To simplify and condense the operating activities section, companies report only major classes of operating cash receipts and cash payments. 3. For these major classes, the difference between cash receipts and cash payments is the net cash provided by operating activities. Slide 13-56 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Step 1: Operating Activities Illustration 13B-2 Slide 13-57 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Illustration 13B-1 Slide 13-58 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Illustration 13B-1 Additional information: 1. In 2011, the company declared and paid a $32,000 cash dividend. 2. Bonds were issued at face value for $130,000 in cash. 3. Equipment costing $180,000 was purchased for cash. 4. Equipment costing $20,000 was sold for $17,000 cash when the book value of the equipment was $18,000. 5. Ordinary shares of $60,000 were issued to acquire land. Slide 13-59 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Cash Receipts from Customers For Juarez Company, accounts receivable decreased $3,000. Illustration 13B-3 Illustration 13B-5 Slide 13-60 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Cash Payments to Suppliers In 2011, Juarez Company’s inventory increased $10,000 and cash payments to suppliers were $678,000. Illustration 13B-6 Illustration 13B-7 Illustration 13B-9 Slide 13-61 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Cash Payments for Operating Expenses Cash payments for operating expenses were $179,000, Illustration 13B-10 Illustration 13B-11 Slide 13-62 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Cash Payments for Income Taxes Cash payments for income taxes were $24,000, Illustration 13B-12 Illustration 13B-13 Slide 13-63 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Step 2: Investing and Financing Activities Increase in Equipment. (1) Juarez purchased for cash equipment costing $180,000. And (2) it sold for $17,000 cash equipment costing $20,000, whose book value was $18,000. Illustration 13B-15 Slide 13-64 SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Step 2: Investing and Financing Activities Increase in Land. Juarez’s land increased $60,000. The additional information section indicates that the company issued ordinary shares to purchase the land. Increase in Bonds Payable. Bonds Payable increased $130,000. The additional information indicated that Juarez issued, for $130,000 cash, bonds with a face value of $130,000. Slide 13-65 Significant non-cash investing and financing transaction. Financing activity. SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Step 2: Investing and Financing Activities Increase in Share Capital - Ordinary. The Share Capital - Ordinary account increased $60,000. The additional information indicated that Juarez acquired land from the issuance of ordinary shares. Increase in Retained Earnings. The $52,000 net increase in Retained Earnings resulted from net income of $84,000 and the declaration and payment of a cash dividend of $32,000. Slide 13-66 Significant non-cash investing and financing transaction. Financing activity (cash dividend). SO 6 Prepare a statement of cash flows using the direct method.
  • Statement of Cash Flows-Direct Method Step 2: Investing and Financing Activities Step 3: Net Change in Cash Illustration 13B-16 Slide 13-67 SO 6 Prepare a statement of cash flows using the direct method.
  • Copyright “Copyright © 2011 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.” Slide 13-68