Long Lived Real Assets

ort-lived Assets r a nvestments in securities & assets of other firms

Fixed Assets Current Assets Financial Investments

(Assets which are not physical,^ Intangible Assets like patents & trademarks )


Current ( Short-term liabilities of the firm) Liabilties firm

Debt Other c

Debt obligations of firm


Liabilities Other long-term obligations Equity Equity investment in firm ^

The next is the income statement, shown in Figure 3.2, which provides information on the revenues and expenses of the firm, and the resulting income made by the firm, during a period. The period can be a quarter (if it is a quarterly income statement) or a year (if it is an annual report).

Figure 2: Income Statement

Gross revenues from sale ^of products or services

/Expenses associates with \senerating revenues )

(Operating income for the period )

Expenses associated with .borrowing and other financing a

Taxes due on taxable income e

'Earnings to Common Î Preferred Equity for Current Period

(Profits and Losses not N associated with operations )

/Profits or losses associated ( with changes in accounting rules f5

st ividends paid to preferred stockholders


- Operating Expenses = Operating Income

- Financial Expenses

- Taxes

= Net Income before extraordinary items

- (+) Extraordinary Losses (Profits)

- Income Changes Associated with Accounting Changes

- Preferred Dividends

= Net Income to Common Stockholders

Finally, there is the statement of cash flows, shown in figure 3.3, which specifies the sources and uses of cash of the firm from operating, investing and financing activities, during a period.

Figure 3: Statement of Cash Flows

Net cash flow from operations, ]

fil ter taxes and interest expenses^ Cash Flows From Operations

Includes divestiture and acquisition of real assets (capital expenditures) and disposal and purchase of financial assets. Also include ^acquisition of other firms._y

Net cash flow from the issue and repurchase of equity, from the issue and repayment of debt and after dividend payments

+ Cash Flows From Investing

+ Cash Flows from Financing

= Net Change in Cash Balance

The statement of cash flows can be viewed as an attempt to explain how much the cash flows during a period were, and why the cash balance changed during the period.

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