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Module 2: Reformation

Module 2: Reformation. Brian Phelan. Agenda. Enterprise Operations vs. Financing Activities Net Enterprise Assets Net Financing Liabilities Common Stock Equity Enterprise Profit After Tax Financing Expenses After Tax Comprehensive Income. Enterprise Operations.

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Module 2: Reformation

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  1. Module 2: Reformation Brian Phelan

  2. Agenda • Enterprise Operations vs. Financing Activities • Net Enterprise Assets • Net Financing Liabilities • Common Stock Equity • Enterprise Profit After Tax • Financing Expenses After Tax • Comprehensive Income

  3. Enterprise Operations • Business/production activities • Not the same for all businesses • Investment banks are different from retailers

  4. Financing Activities • Tangential to core business purpose • Borrowing and lending • How the business is funded

  5. Net Enterprise Assets • Separate enterprise assets and liabilities from financing • Limit cash ≈ 2% of sales • Includes: inventory, PPE, goodwill, accounts payable, and deferred income taxes

  6. Net Enterprise Assets

  7. Net Financing Liabilities • Assets and liabilities not included in enterprise • Includes long term debt payable • Non-controlling interests are included • Preferred stock is treated as debt

  8. Net Financing Liabilities

  9. Common Stockholder Equity • NEA = NFL + CSE • Common Equity paid last • Used to check NEA and NFL

  10. Common Stockholder Equity

  11. Enterprise Profit After Tax • Use Income Statement and other comprehensive income • Separate enterprise income and expenses from financing • Adjust for taxes

  12. Enterprise Profit After Tax

  13. Financing Expense After Tax • Income statement and other comprehensive income • Separate financing from enterprise • Adjust for taxes • Does not include common equity

  14. Financing Expense After Tax

  15. Comprehensive Income • CI = EPAT – FEAT • Used to check EPAT and FEAT • Shows income split by enterprise and financing but total remains

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