48 PART 1 Introduction to Managerial Finance
TABLE 2.4 Bartlett Company Statement of Cash
Flows ($000) for the Year Ended
December 31, 2003Cash Flow from Operating Activities
Net profits after taxes $231
Depreciation 239
Increase in accounts receivable ( 138)a
Decrease in inventories 11
Increase in accounts payable 112Increase in accruals (^4) (^5)
Cash provided by operating activities $500
Cash Flow from Investment Activities
Increase in gross fixed assets ($347)
Change in business interests (^0)
Cash provided by investment activities ( 347)
Cash Flow from Financing Activities
Decrease in notes payable ($ 20)
Increase in long-term debts 56
Changes in stockholders’ equityb 11
Dividends paid ( (^1) (^0) (^8) )
Cash provided by financing activities ( (^6) (^1) )
Net increase in cash and marketable securities $
9
2
aAs is customary, parentheses are used to denote a negative number, which in this case is a
cash outflow.
bRetained earnings are excluded here, because their change is actually reflected in the
combination of the “net profits after taxes” and “dividends paid” entries.
notes to the financial statements
Footnotes detailing information
on the accounting policies,
procedures, calculations, and
transactions underlying entries
in the financial statements.
Notes to the Financial Statements
Included with published financial statements are explanatory notes keyed to the
relevant accounts in the statements. These notes to the financial statementspro-
vide detailed information on the accounting policies, procedures, calculations,
and transactions underlying entries in the financial statements. Common issues
addressed by these notes include revenue recognition, income taxes, breakdowns
of fixed asset accounts, debt and lease terms, and contingencies. Professional
securities analysts use the data in the statements and notes to develop estimates of
the value of securities that the firm issues, and these estimates influence the
actions of investors and therefore the firm’s share value.
Consolidating International Financial Statements
So far, we’ve discussed financial statements involving only one currency, the U.S.
dollar. The issue of how to consolidate a company’s foreign and domestic finan-
cial statements has bedeviled the accounting profession for many years. The cur-