Bus 251 Midnight Version

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Bus 251 Midnight Version

  1. 1. Teck Resources limited:<br />The Cash flow Statement<br />June Kim & Cora Lam<br />BUS 251Financial Accounting I<br />
  2. 2. Amortization<br />An artificial decrease in the value of equipment<br />Non-cash item<br />Subtracted in the income statement<br />So, why is the amortization amount added to cash?<br />To add back the subtracted amount<br />i.e. un-subtracting<br />
  3. 3.
  4. 4. Income Statement<br />Cash flow Statement<br />Operating Performance<br />Vs.<br />Accrual<br />Cash-based<br />
  5. 5. Net Earnings from Continued Operations<br />Decreased<br />BAD NEWS<br />
  6. 6. Overall cash flow from operating activities<br />Increased<br />GOOD NEWS<br />
  7. 7. Which determines performance?<br />
  8. 8.
  9. 9. Net Earnings<br />Overall Cash Flow<br />Increases<br />with revenue<br />Decreases<br />with amortization<br />with asset impairment<br />with taxes payable<br />Increases<br />with revenue<br />Decreases<br />with new cash equipment purchases<br />with tax payments<br />Operating Performance<br />
  10. 10. In Detail<br />A decrease in[Net earnings from continued operations]is caused by<br />More operating expenses<br />More amortization/asset impairment<br />An increase in [Overall cash flow from operating activities]implies<br />Net income is not manipulated<br />
  11. 11. So what?<br />Performance: Net income = Revenue – Expense<br />A decrease? BAD NEWS!<br />Less ROI: less attractive to shareholders<br />POSITIVE cash flow from operations <br />GOOD NEWS!<br />Higher Liquidity<br />
  12. 12. In General…<br />In the long-run, Net income = Cash flow <br />But in the short-term, Net income ╪ Cash flow<br />Positive correlation<br />
  13. 13. Financing<br />
  14. 14. Financing: Debt<br />Issuance of debt<br />Company borrowing money<br />Liability account<br />Decreases net income<br />No cash flow(yet), so should be an increase in cash flow statement<br />Separate information for description<br />Magnitudes are not minimized<br />How much money borrowed and how much money lent<br />Shows a measure of expansion of equity<br />
  15. 15. Financing: Debt (cont.)<br />Separated information of Issuance and Repayment<br />Magnitudes are not minimized<br />How much money borrowed and how much money lent<br />Shows a measure of expansion of equity<br />Why separate?<br />To be more descriptive<br />i.e. information is not filtered by aggregating<br />
  16. 16. Investing: Property, Plant and Equipment<br />
  17. 17. Negative Property?<br />
  18. 18. CHANGE in Property, Plant and Equipment<br />Looking at the balance sheet<br />
  19. 19. CHANGE in Property, Plant and Equipment<br />Negative cash -&gt; Cash out -&gt; They Spent Cash.<br />On the Acquisition of Fording Canadian Coal Trust<br />Overall increase in new equipment purchases<br />Bought more equipment than was amortized<br />Buying a new mine<br />Bought more equipment than used<br />
  20. 20.
  21. 21. Q?<br />

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