17,355 16,538 Gross margin 11,715 11,148 Selling, general and administrative expenses 8,895 8,482 Impairments, store closing costs and (g
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Following are the income statements and balance sheets of Macy's, Inc.
| Consolidated Statement of Income, Fiscal Years Ended ($ millions) |
2014 Estimated |
Feb. 2, 2013 |
|---|---|---|
| Net sales | $29,070 | $27,686 |
| Cost of goods sold | 17,355 | 16,538 |
| Gross margin | 11,715 | 11,148 |
| Selling, general and administrative expenses | 8,895 | 8,482 |
| Impairments, store closing costs and (gain) on sale of leases | -- | 5 |
| Operating income | 2,820 | 2,661 |
| Interest Expense | 425 | 425 |
| Premuim on early retirement debt (loss) | -- | (137) |
| Interest income | 3 | 3 |
| Income before income taxes | 2,398 | 2,102 |
| Federal, state and local income tax expense | 875 | 767 |
| Net Income | $1,523 | $1,335 |
| Consolidated Balance Sheets (millions) |
2014 Estimated |
Feb. 2, 2013 |
|---|---|---|
| Assets | ||
| Current Assets | ||
| Cash and cash equivalents | $1,919 | $1,836 |
| Short-term investments | 1,478 | 0 |
| Receivables | 378 | 371 |
| Merchandise inventories | 5,581 | 5,308 |
| Prepaid expenses and other current assets | 378 | 361 |
| Total current assets | 9,734 | 7,876 |
| Property and equipment, gross | 14,405 | 14,143 |
| Less accumulated depreciaion | 6,979 | 5,947 |
| Property and equipment, net | 7,426 | 8,196 |
| 3,743 | 3,743 | |
| Other intangible assets--net | 561 | 561 |
| Other assets | 640 | 615 |
| Total assets | $22,104 | $20,991 |
| Liabilities and Shareholders Equity | ||
| Current Liabilities | ||
| Short-term debt (current portion of long-term debt) | $144 | $124 |
| Merchandise accounts payable | 1,657 | 1,579 |
| Accounts payable and accrued liabilities | 2,733 | 2,610 |
| Income Taxes | 378 | 355 |
| 436 | 407 | |
| Total current liabilites | $5,348 | $5,075 |
| Long-term debt | 6,325 | 6,806 |
| Deferred income taxes | 1,308 | 1,238 |
| Other liabilites | 1,919 | 1,821 |
| Shareholders' equity | ||
| Common stock (387.7 and 414.2 shares outstanding) | 4 | 4 |
| Additional paid-in capital | 3,872 | 3,872 |
| Accumulated Equity | 6,261 | 5,108 |
| (2,002) | (2,002) | |
| Accumulated other comprehensive loss | (931) | (931) |
| Total shareholders' equity | 7,204 | 6,051 |
| Total liabilities and shareholders' equity | $22,104 | $20,991 |
| CAPEX (Increase in gross Property and equipment)/Net sales | 0.90% |
| 7.30% | |
| Dividends/Net income | 24.30% |
| Long-term debt payments required in fiscal 2014 | $461 |
Refer to the financial information above for Macy's, Inc. Prepare a forecast of its financial year 2014 statement of cash flows.
Round all answers to the nearest whole number. Use negative signs with answers, when appropriate.
| Macy's Forecasted Statement of Cash Flows | |
|---|---|
| ($ millions) | 2014 Estimated |
| Net income |
|
| Add: depreciation |
|
| Change in Receivables |
|
| Change in Merchandise inventories |
|
| Change in Other prepaid expenses & other current assets |
|
| Change in Other long-term assets |
|
| Change in Merchandise accounts payable |
|
| Change in Accounts payable & accrued liabilities |
|
| Change in Income taxes |
|
| Change in Deferred income taxes |
|
| Change in Long-term deferred income taxes |
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| Change in Other long-term liabilities |
|
| Net cash from operating activities |
|
| Capital expenditures |
|
| Increase in Short-term investments |
|
| Net cash from investing activities |
|
| Dividends |
|
| Payments of LT debt |
|
| Net cash from financing activities |
|
| Net change in cash |
|
| Beginning cash |
|
| Ending cash |
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