UNDERSTANDING FINANCIAL STATEMENTS, TAXES, AND FREE CASH FLOWS

I.K. Gunarta

ITS Surabaya

Email: ik.gunarta@gmail.com

Mobile: 0811 372 068

Income statement A summary of the revenue and expenses for a specific period of time.

Statement of owners equity A summary of the changes in the owners equity that have occurred during a specific period of time.

Balance sheet A list of the assets, liabilities, and owners equity as of a specific date.

Statement of cash flows A summary of the cash receipts and disbursements for a specific period of time.

Financial Statements

Income Statement

SALES

- EXPENSES

= PROFIT

Cost of Goods Sold

Operating Expenses(marketing, administrative)

Financing Costs

Taxes

SALES

- Cost of Goods Sold

GROSS PROFIT

- Operating Expenses

OPERATING INCOME (EBIT)

- Interest Expense

EARNINGS BEFORE TAXES (EBT)

- Income Taxes

EARNINGS AFTER TAXES (EAT)

- Preferred Stock Dividends

- NET INCOME AVAILABLE

TO COMMON STOCKHOLDERS

Income Statement

SALES

- Cost of Goods Sold

GROSS PROFIT

- Operating Expenses

OPERATING INCOME (EBIT)

- Interest Expense

EARNINGS BEFORE TAXES (EBT)

- Income Taxes

EARNINGS AFTER TAXES (EAT)

- Preferred Stock Dividends

- NET INCOME AVAILABLE

TO COMMON STOCKHOLDERS

Income Statement

2002

Penjualan 4,195,197

Harga pokok penjualan 2,673,129

Laba kotor 1,522,068

Beban penjualan, umum dan administrasi 465,831

Depresiasi 160,119

Jumlah beban usaha 625,950

Laba usaha 896,118

Biaya bunga 17,849

Pendapatan sebelum pajak 878,269

Provisi pajak pendapatan 298,052

Pendapatan bersih 580,217

Gross margin 36%

Operating margin 21%

Net Margin 14%

EBITDA margin 25%

Laporan Laba Rugi Harley Davidson 31-12-2002

Pendapatan dari aktivitas

operasional

Juga disebut sebagai

pendapatan sebelum bunga dan

pajak

Pendapatan yang dihasilkan dari

aktivitas usaha dan aktivitas

pembiayaanBiaya modal

pinjaman

2002

Penjualan 4,195,197

Harga pokok penjualan 2,673,129

Laba kotor 1,522,068

Beban penjualan, umum dan administrasi 465,831

Depresiasi 160,119

Jumlah beban usaha 625,950

Laba usaha 896,118

Biaya bunga 17,849

Pendapatan sebelum pajak 878,269

Provisi pajak pendapatan 298,052

Pendapatan bersih 580,217

Gross margin 36%

Operating margin 21%

Net Margin 14%

EBITDA margin 25%

Laporan Laba Rugi Harley Davidson 31-12-2002

Rasio

Profitabilitas

Balance Sheet

Total Assets =

Outstanding

Debt

Shareholders

Equity

+

Balance SheetAssets Liabilities (Debt) & Equity

Current Assets

Cash

Marketable Securities

Accounts Receivable

Inventories

Prepaid Expenses

Fixed Assets

Machinery &

Equipment

Buildings and Land

Other Assets

Investments & patents

Current LiabilitiesAccounts PayableAccrued ExpensesShort-term notes

Long-Term LiabilitiesLong-term notes Mortgages

EquityPreferred Stock Common Stock (Par

value)Paid in CapitalRetained Earnings

Current Assets: assets that are relatively liquid, and are expected to be converted to cash within a year. Cash, marketable securities, accounts receivable, inventories, prepaid expenses.

Assets

Fixed Assets: machinery

and equipment, buildings,

and land.

Assets

Other Assets: any asset that is not a current asset or fixed asset. Intangible assets, such as patents and copyrights.

Assets

Debt Capital: financing provided by a creditor.

Short-term debt: borrowed money that must be repaid within the next 12 months. Accounts payable, other payables such as interest or taxes payable, accrued expenses, short-term notes.

Long-term debt: loans from banks or other sources that lend money for longer than 12 months.

Financing

Financing

Equity Capital: shareholders investment in the firm.

Preferred Stockholders: receive fixed dividends, and have higher priority than

common stockholders in event of

liquidation of the firm.

Common Stockholders: residual owners of a business. They receive

whatever is left after creditors and

preferred stockholders are paid.

Corporate Income Tax RatesSince 1993

Taxable Income Corporate Tax Rate

$1 - $50,000 15%

$50,001 - $75,000 25%

$75,001 - $100,000 34%

$100,001 - $335,000 39%

$335,001 - $10,000,000 34%

$10,000,001 - $15,000,000 35%

$15,000,001 - $18,333,333 38%

over $18,333,333 35%

Free Cash Flows

Free cash flow: cash flow that is free and

available to be distributed to the firms investors (both debt and equity investors).

Free Cash Flows

Cash Flows from

Assets =Cash Flows from

Financing

Cash flows generated

through the firms

assets=

Cash flows paid to - or

received from - the

firms investors

(creditors &

stockholders)

Calculating Free Cash Flows:An Asset Perspective

After-tax cash flow

from operations

less

investment in net

operating

working capital

less

investments in fixed

and other assets

Calculating Free Cash Flows:An Asset Perspective

After-tax cash flow

from operations

less

investment in net

operating

working capital

less

investments in fixed

and other assets

Operating income

+ depreciation

- cash tax payments

Calculating Free Cash Flows:An Asset Perspective

After-tax cash flow

from operations

less

investment in net

operating

working capital

less

investments in fixed

and other assets

[Change in current

assets]

-[change in non-interest

bearing current liabilities]

Calculating Free Cash Flows:An Asset Perspective

After-tax cash flow

from operations

less

investment in net

operating

working capital

less

investments in fixed

and other assets

Change in gross

fixed assets, and

any other assets

that are on the

balance sheet.

Calculating Free Cash Flows:A Financing Perspective

Interest payments to creditors

- change in debt principal

- dividends paid to stockholders

- change in stock

= Financing Free Cash Flows

Tax Example:

Contoh Perhitungan Tax Liability (Kewajiban Pajak)

Space Cow Computer has sales of $32 million, cost of goods sold at 60% of sales, cash operating expenses of $2.4 million, and $1.4 million in depreciation expense. The firm has $12 million in 9.5% bonds outstanding. The firm will pay $500,000 in dividends to its common stock holders.

Calculate the firms tax liability.

Sales $32,000,000

Cost of Goods Sold (19,200,000)

Operating Expenses (2,400,000)

Depreciation Expense (1,400,000)

EBIT 9,000,000

Interest Expense (1,140,000)

Taxable Income 7,860,000

Income Tax Rate Tax Payment

50,000 x 0.15 = 7,500

25,000 x 0.25 = 6,250

25,000 x 0.34 = 8,500

235,000 x 0.39 = 91,650

7,525,000 x 0.34 = 2,558,500

Total Tax Payments 2,672,400

Atau, total tax payments:

7,860,000 x 0.34 = 2,672,400