February 15, 2005 Maureen Novak, CFA CFP Smith Barney OnSite ...

February 15, 2005 Maureen Novak, CFA CFP Smith Barney OnSite Coordinator 1

Forming a Strategic Partnership With

Finance

The Pastella / Novak Group at Smith Barney

Maureen Novak, CFA

Certified Financial Planner

OnSite Coordinator


Financial Statements

• Balance Sheet

• Income Statement

• Cash Flow Statement


Balance Sheet

• Assets

• Liabilities

• Shareholders’ Equity


Balance Sheet

Assets = Liabilities + Shareholders’ Equity


Balance SheetLeft Hand Side (Assets)

Current Assets – cash, accounts receivable, assets that can be converted into cash quickly

Property & Equipment – long term operating assets

Other Assets – anything else

Goodwill – excess of purchase price over FMV

Right Hand Side (Liabilities & Shareholders’ Equity)

Current Liabilities – liabilities that come due within 12 months

Long Term Liabilities – debt not maturing in 12 months; i.e. bonds

Stockholders’ Equity – what’s leftover after all debt has been paid


Abercrombie & FitchConsolidated Balance Sheets (‘000s)

February 2, 2002 February 3, 2001

Current Assets

Cash and Equivalents $167,664 $137,581

Marketable Securities 71,220 -

Receivables 20,456 15,829

Inventories 108,876 120,997

Store Supplies 21,524 17,817

Other 15,455 11,338

Total Current Assets 405,195 303,562


Abercrombie & FitchConsolidated Balance Sheets (‘000s)

February 2, 2002 February 3, 2001

Current Liabilities

Accounts Payable $31,897 $33,942

Accrued Expenses 109,586 101,302

Income Taxes Payable 22,096 21,379

Total Current Liabilities 163,579 156,623


Balance Sheet

Cash

Working Capital

Working Capital = Current Assets – Current Liabilities

= $405,195 – 163,579

= $241,616


Income Statement

• Revenue

• Cost of Goods Sold (COGS)

• Gross Profit

• Gross Profit Margin


Income Statement

Ice Cream Store

• Bought 100 gallons of ice cream for $2/gallon

• Sold each gallon for $5


Income Statement

Total Revenue $500 (100 gallons x $5/gallon)

Cost of Revenue $200 (100 gallons x $2/gallon)

Gross Profit $300

Gross Profit Margin .6 (60%)

= Gross Profit / Total Revenue

= $300 / $500

= .6 (60%)


Income Statement

• Operating Expenses

Research & Development

Selling, General & Administrative (SG&A)

• Operating Income

• Net Income


Income Statement

Ice Cream Store

• 100 gallons of chocolate ice cream for $2/gallon

• Sold each gallon for $5

• Signs and Advertising $12

• Employee Salary $13

• Survey of favorite flavors $10


Income Statement

Revenue $500 $500

COGS 200 200

Gross Profit $300 $300

Operating Expenses:

SG&A 25 12

R&D 10 10

Operating Income $265 $278

Interest Income and Taxes (80) (80)

Net Income $185 $198

Ice Cream Store Example


Income Statement

Revenue $500 $500

Operating Expenses:

SG&A 25 12

R&D/Marketing 10 10


Operating Profit Margin .53 .56

= Operating Profit / Revenue

= $265 / $500

= .53 (53%)



Income Statement

Revenue $500 $500


Interest Income and Taxes (80) (80)

Net Income $185 $198

Net Profit Margin .37 .40

= Net Profit / Revenue

= $185 / $500

= .37 (37%)



Abercrombie & FitchConsolidated Statements of Income (‘000s)

Fiscal year ended 2001 2000 1999

Net Sales $1,364,853 $1,237,604 $1,030,858

Cost of Goods Sold, Occu-

pancy & Buying Costs 806,816 728,229 580,475

Gross Income 558,034 509,375 450,383

General, Administrative and

Store Operating Expense 286,576 255,723 209,319

Operating Income 271,458 253,652242,064

Interest Income, Net (5,064) (7,801) (7,270)

Income Pre-Income Txs 276,522 261,453249,334

Provision for Income Txs 107,850 103,320 99,730

Net Income $168,672 $158,133 $149,604


$$ Working Capital = Current Assets – Current Liabilities

$$ Gross Profit = Revenue – COGS (Cost of Goods Sold)

% Gross Profit Margin = Gross Profit / Revenue

$$ Operating Profit = Gross Profit – Operating Expenses

% Operating Margin = Operating Income / Revenue

$$ Net Income = Revenue – Everything

% Net Profit Margin = Net Income / Revenue

In Review


Resourceswww.SEC.gov

www.freeedgar.com

Barron’s “Dictionary of Finance and Investing Terms”

“How to Detect Accounting Gimmicks and Fraud in Financial Reports” by Howard Schilit

The Wall Street Journal Guide to Understanding Money & Investing

The Wall Street Journal Guide to Understanding Personal Finance


Smith Barney OnSite Services

Financial planning and

educational seminars for employees.

February 15, 2005 Maureen Novak, CFA CFP Smith Barney OnSite ...

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