Full version of BUS251 overkill presentation

1. Teck Resources limited: The Cash flow Statement June Kim & Cora Lam BUS 251Financial Accounting I

2. Amortization An artificial decrease in the value of equipment Non-cash item Subtracted in the income statement So, why is the amortization amount added to cash? To add back the subtracted amount i.e. un-subtracting

4. Income Statement Cash flow Statement Operating Performance Vs. Accrual Cash-based

5. Net Earnings from Continued Operations Decreased BAD NEWS

6. Overall cash flow from operating activities Increased GOOD NEWS

7. Which determines performance?

9. Net Earnings Overall Cash Flow Increases with revenue Decreases with amortization with asset impairment with taxes payable Increases with revenue Decreases with new cash equipment purchases with tax payments Operating Performance

10. In Detail A decrease in[Net earnings from continued operations]is caused by More operating expenses More amortization/asset impairment An increase in [Overall cash flow from operating activities]implies Net income is not manipulated

11. So what? Performance: Net income = Revenue – Expense A decrease? BAD NEWS! Less ROI: less attractive to shareholders POSITIVE cash flow from operations GOOD NEWS! Higher Liquidity

12. In General… In the long-run, Net income = Cash flow But in the short-term, Net income ╪ Cash flow Positive correlation

13. Financing

14. Financing: Debt Issuance of debt Company borrowing money Liability account Decreases net income No cash flow(yet), so should be an increase in cash flow statement Separate information for description Magnitudes are not minimized How much money borrowed and how much money lent Shows a measure of expansion of equity

15. Financing: Debt (cont.) Separated information of Issuance and Repayment Magnitudes are not minimized How much money borrowed and how much money lent Shows a measure of expansion of equity Why separate? To be more descriptive i.e. information is not filtered by aggregating

16. Investing: Property, Plant and Equipment

17. Negative Property?

18. CHANGE in Property, Plant and Equipment Looking at the balance sheet

19. CHANGE in Property, Plant and Equipment Negative cash -> Cash out -> They Spent Cash. On the Acquisition of Fording Canadian Coal Trust Overall increase in new equipment purchases Bought more equipment than was amortized Buying a new mine Bought more equipment than used

21. Q?