Professional Documents
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CH 03
CH 03
Chapter 3
a
Cash includes investments in marketable securities.
Equation 3.2
• Real assets
o Land
o Buildings
o Equipment
o Intangible assets
o Goodwill
o Patents
o Copyrights
Exhibit 3.2 The income statement shows the sales, expenses, and profit earned by the firm
over a specific period of time.
2020 2019
Net sales a $1,563.7 $1,386.7
Cost of goods sold 1,081.1 974.8
Selling and administrative expenses 231.1 197.4
Earnings before interest, taxes, depreciation, and amortization
$ 251.5 $ 214.5
(EBITDA)
Depreciation and amortization 83.1 75.3
Earnings before interest and taxes (EBIT) $ 168.4 $ 139.2
Interest expense 5.6 18.0
Earnings before taxes (EBT) $ 162.8 $ 121.2
Taxes 44.3 16.1
Net income $118.50 $105.10
Per-share data:
a
Cashincludes
Cash flow per share (CFPS)
investments $
in marketable securities. 3.69 $ 3.31
L.O. 3.4 Copyright ©2022 John Wiley & Sons, Inc. 36
Net Income Example
Cash Reconciliationa
a
Cash includes investments in marketable securities.
L.O. 3.5 Copyright ©2022 John Wiley & Sons, Inc. 49
3.6 Tying Together the Financial Statements
LEARNING OBJECTIVE
Explain how the four major financial statements discussed in this
chapter are related
Exhibit 3.5 The statement of cash flows ties together the income statement with the balance sheets
from the beginning and the end of the period. The statement of retained earnings shows how the
retained earnings account has changed from the beginning to the end of the period.