Manajemen Keuangan Program Magister Manajemen Universitas Gunadarma Budi Hermana Refferences: Principles of Managerial Finance, Lawrence J. Gitman, Harper Collins Publishers

The Role of Finance and The Financial Manager Chapter 1 The Role of Finance and The Financial Manager

The Role of Finance and The Financial Manager The art and Science of managing money Concerned with the process, institution, markets, and instrument involved in the transfer of money among and between individuals, businesses, and governments Financial Services Areas& Opportunities? The area of finance concerned with the design and delivery of advice and financial product to individual, business, and governments Managerial Finance concerned with the duties of the financial manager in the business firm. Budgeting Actively manage the financial affairs of many tipes of business- financial and non-financial, private and public, large and small, profit-seeking and not-for-profit Financial forecasting Cash management Task? Credit administration Investment Analysis Funds procurement

A Business owned by one person and operated for his or her own profit Basic Forms Of Business Organization A Business owned by one person and operated for his or her own profit Sole Proprietorship Small firm, unlimited liability A Business owned by two or more persons and operated for profit Partnerships Written contract (article of partnership), unlimited liability, Limited partership An Intangible business entity created by law (often called a “legal entity”) Corporations Stockholders, board of directors, Chief executive officer (CEO)

Basic Forms Of Business Organization Legal Form Sole Propriatorship Partenrship Corporation Strength Owner receives all profits (as well as losses) Low organizationak costs Income taxed as personnel income of proprietor Secrecy Ease of dissolution Can raise more more funds than sole proprietorships Borrowing power enhanced by more owners More available brain power and managerial skill Can retain good employees Income taxed as personnel income of partners Owners have limited liability which guarantees they cannot lose more than invested Can achieve large size due to marketability of stock (ownership) Ownership is readily transferable Long-life of firm- not dissolved by detah of owners Can hire professional managers Can expand more easily due to access to capital markets Receives certain tax advantages Weaknesses Owner has unlimited liability-total wealth can be taken to satisfy debts Limited fund-raising power tends to inhibit growth Propietor must be jack-of-all-trades Difficult to give employees long run career opportunity Lacks continuity when propitor dies Owners have unlimited liability and may have to covers debts of other less financially sound partners When a aparter dies, partership is dissolved Difficul to liquidate or transfer partership Difficult to achieve large-scale operations Taxes generally higher since corporate income is taxed and dividends paid to owners ara again taxed More expensive to organize than other business forms Subject to greater government regualation Employees often lack personnel interest in firm Lack secrecy since stockholders must receive financial reports

? The Managerial Finance Function Since most business decisions are measured in financial terms, the financial manager plays a key role in the operation of the firm Managerial Finance is closely related to, but quite different from, Economics and Accounting ? Organizational View The size and importance of the managerial finance depend on the size of the firm In small firm the finance function generally performed by the accounting department In medium-to-large-size firm Financial Manager Separate department, vice-president of finance (CFO), Treasurer, Controller The officer responsible for the firm’s financial activities: financial planning and fund raising, managing cash, making capital expenditure decision, managing credit activities and managing the investment portfolio The officer responsible for the firm accounting activities: tax management, data processing, and cost and financial accounting

Supply-demand analysis Profit-Maximazing strategies The Managerial Finance Function Relationship to Economics The Financial Manager must understand the economic framework, and be alert to the consequences of varying levels of economic activity and changes in economic policy ? Must be able to use economic theories as guidelines for efficient busineness operation Supply-demand analysis Profit-Maximazing strategies Price Theory Marginal Analysis Economic principle which states that financial decisions should be made and actions taken only when the added benefit exceed the added costs Example Benefits with new computer $100.000 Less: Benefits with old computer 35.000 (1) Marginal (Added) benefits $65.000 Cost of new computer $80.000 Less: Proceeds from sale of old com 28.000 (2) Marginal (added) costs $52.000 Net Benefit [(1) – (2)] $13.000

Relationship to Accounting The Managerial Finance Function Relationship to Accounting The finance and accounting function are closely related and generally overlap; indeed, managerial finance and accounting are not often easily distinguishable. In smal firm the controller often carries out of the finance function, and in large firms many accountants are intimately involved in various finance activities ? Two Basic Differences Emphasis of cash flows Decision Making Accrual Method vs Cash Method The accountant devotes the majority of attention to the collection and presentation of financial data The financial manager evaluates the accountant’s statements, develops additional data, and makes decisions based on subsequent analyses This does not mean that accountant never make decision, or that financial manager never gather data Recognizes revenue at the point of sale and recognized expenses when incurred Recognized revenues and expenses only with respect to actual inflow and outflows of cash Accounting View Financial View Income statement ABC Corporation For the year xxxx Sales Revenue $100.000 Less: Costs 80.000 Net Profit $ 20.000 Income statement ABC Corporation For the year xxxx Cash inflow $ 0 Less: Cash Outflow 80.000 Net Profit ($80.000)

The Managerial Finance Function Key Activities of The Financial Manager Primary Activities Performing Financial Analysis and Planning Balance Sheet Current Assets Fixed Liabilities Long-Term Funds Performing Financial Analysis and Planning Making Investment Decision Making Financing Transforming financial data into a form that can be used to monitor the firm’s financial condition Evaluating the need for increased (or reduced) productive capacity Determining what additional (or reduced) financing is required Making Investment Decisions Determine both the mix and the type of assets found on the firm’s balance sheet The left-hand side of the balance sheet Making Financing Decision Deals with The right-hand side of the balance sheet and involves two major area: Most appropriate mix of short-term and long-term financing must be established Which individual short-term or long-term sources of financing are the best at given point in time

Goal of The Financial Manager Stockholder are risk-averse ? The Managerial Finance Function Goal of The Financial Manager Maximize Profit? Some pepople believe that the owner’s objective is always to maximize profits The Financial Manager are expected to make a major contribution to the firm’s overall profit For Corporation, profit are commonly measured in terms of Earnings per Share (EPS) EPS: The amount earned during the period on each outstanding share of common stock period’s total earnings avaliable for the firm’s common stock holders The number of shares of common stock outstanding Investment year 1 year 2 year 3 total X $1.40 $1.00 $0.40 $2.80 Y 0.60 1.00 1.40 3.00 Earning per share (EPS) The chance that actual outcomes may differs from those expected Basic primises in managerial finance is that trade-off exist between return (cash flow) and risk Return and risk are in fact the key determinant of share price– which represents the wealth of the owners in the firm √ Profit maximization fails for reason: Timing of return Cashflow avaliable to stockholder Risk Stockholder are risk-averse ?

Goal of The Financial Manager Maximizing Shareholder Wealth The Managerial Finance Function Goal of The Financial Manager Maximizing Shareholder Wealth The goal of the financial manager is to maximize the wealth of the owners for whom the firm is being managed Timing of return (cash flow) Measured by the share price of the stock magnitude Risk Financial decisions and share price Financial Manager Financial Decision Alternative or action Return? Risk? Increase Share Price ? Yes Reject Acept

Goal of The Financial Manager The Managerial Finance Function Goal of The Financial Manager The Agency Issue Management can be viewed as agents of the owners who have hired them and given them decision-making authority to manage the firm for the owners’ benefit The goal of the financial manager should be to maximize the wealth of the owners of the firm In theory In practise Most financial managers would agree with the goal of owner wealth maximization However, managers also concern with their personnel wealth, job security, lifestyle, and privilege Agency problem To prevent or minimize problem The likelihood that managers may place personnel goals ahead of corporate goals Agency Cost Audit&control Monitoring expenditure Fidelity bond Bonding expenditure Managerial compensation: stock option, performance share, cash bonuses Structuring expenditure Opportunity cost

Goal of The Financial Manager The Managerial Finance Function Goal of The Financial Manager The Role of Ethics Ethics – Standard of conduct or moral judgement example Corporate Ethics Guidelines and Policies Responsibility Ethics and share price Fairness Transparency Issues Update Accountability Good Corporate Governance www.fcgi.or.id http://www.kpk.go.id/modules/edito/content.php?id=27 http://www.bi.go.id/NR/rdonlyres/2246113B-DC63-4731-8558-3693A6254962/3449/pbi8406.pdf Corporate Social Responsibility http://www.goodyear-indonesia.com/social_responsibility.html http://www.telkom.co.id/pojok-media/siaran-pers/telkom-memperoleh-penghargaan-corporate-social-responsibility.html Certified Financial Analyst http://www.cfainstitute.org

The Operating Environment of The Firm Chapter 2 The Operating Environment of The Firm

Corporate Tax Rate Schedule Business Taxation Ordinary Income Income earned through the sale of a firm’s goods and services Corporate Tax Rate Schedule Range of taxable income Base Tax + (rate x amount over base bracket) $ 0 to $ 50.000 $ 0 + (15% x Amount over $ 0) 50.000 to 75.000 7.500 + (25 x Amount over 50.000) 75.000 to 100.000 13.750 + (34 x Amount over 75.000) 100.000 to 335.000 22.250 + (39 x Amount over 100.000) over $335.000 113.900 + (34 x Amount over 335.000) Tax Calculation Example PT X has before-tax earnings of $250.000 Total Tax due = $22.250 + [0.39 x ($250.000-100.000)] = $22.250 + (0.39 x $150.000) = $22.250 + $58.500 = $80.750 Indonesia ?

Business Taxation A Firm’s taxes divided by its taxable income Ordinary Income Average Tax Rates A Firm’s taxes divided by its taxable income Pretax Tax Average Tax rate Income Liability [(2) : (1)] (1) (2) (3) $ 50.000 $ 7.500 15.00% 75.000 13.750 18.33% 100.000 22.250 22.25% 200.000 61.250 30.63% 335.000 113.900 34.00% 500.000 170.000 34.00% 1.000.000 340.000 34.00% 2.500.000 850.000 34.00% Average tax rate ranges from 15 to 34%, reaching 34% when taxable income ≥ $335.000 Average tax rate for PT X = $80.750 / $250.000 = 32.3% Marginal Tax Income The rate at which additional income is taxed If PT X’s earnings go up to %300.000, the marginal tax rate on the additional $50.000 of income will be 39%. The company will therefore have to pay additional taxes of $19.500 (0.39 x $50.000) Total Taxes on the $300.000 = $80.750+$19.500 = $100.250 Using Taxe rate schedule: Total Taxes = $22.250+[0.39x($300.000 - $100.000)] = $22.250+$78.000 =$100.250

Interest and Dividend Income Business Taxation Ordinary Income Interest and Dividend Income Interest received by the corporation is included as ordinary income Devidend received on common and preferred stock held in other corporation, and representing less than 20% ownership in them, on the other hand, are subject to a 70% exclusion for tax puposes Only 30% of these intercorporate dividends are included as ordinary income Avoid triple taxation Example Charnes Industries received $100.000 interest on bonds it held and $100.000 in dividends on common stock it owned in other corporation. The firm is subject to a 40% marginal-tax rate and is eligible for 70% exclusion on its intercorporate dividend receipts Interest Income Dividend Before-tax amount Less: Applicable Exclusion Taxable amount (2) Tax (40%) After-tax amount (1)-(2) $100.000 40.000 $ 60.000 70.000 $ 30.000 12.000 $ 88.000 (0,70x$100.000) = Indonesia ?

Tax-Deductible Expenses tax-deductible expense Business Taxation Ordinary Income Tax-Deductible Expenses Corporation are allowed to deducti operating expenses. The tax-deductible expenses reduces their after-tax cost. Advertising expenses Insurance? Sales commision CSR? Bad debt Interest expenses Example Company X and Y each expect in the coming year to have earnings before interest and taxes of $200.000. Company X during the year will have to pay $30.000 in interest; Company Y has no debt and therefore will have no interest expenses. Calculate the earnings after taxes for these two firm, which pay 40% tax on ordinary income Interest Income Dividend Earning before interest&tax Less: Interest expenses Earnings before tax Less: Taxes (40%) Earnings after taxes $200.000 30.000 $170.000 68.000 $ 102.000 80.000 $120.000 Difference in earning after taxes $18.000 Dividends are not tax-deductible expense

Business Taxation Capital Gains Amount by which the price at which an asset was sold exceeds the asset’s initial purchase price For corporation, capital gain are added to ordinary corporate income and taxed at the regular corporate rates Example The Ross Company has operating earnings of $500.000 and hast just sold for $40.000 a capital asset initially purchased two years ago for $36.000. Since the asset was sold for more than its initial purchased, there is capital gain of $4000 ($40.000 sale price - $36.000 initial purchase price) The corporation’s taxable income will total $504.000 ($500.000 ordinary income plus $4.000 capital gain) Since this total is above$335.000, the capital gain will be taxed at the 34%, resulting in tax of $1.360 (0,34 x $4000)

? Financial Institutions and Markets: An Overview Financial institutions and markets are important elements in a firm’s operating environment ? Firms that require funds from external sources can obtain them in three ways Financial Institution That accept savings and transfers them to those needing funds Financial Market Organized forum where the suppliers and demanders of various type of funds can make transaction Private placement

Financial Institution Financial Institutions and Markets: An Overview Financial Institution An intermediary that channels the savings of individuals, businesses, and governments into loans or investment Major Financial Institutions USA Indonesia Commercial Bank Accepts both demand (checking) and time (savings) deposits. Makes loans directly to borrowers or through the financial market Bank Umum Savings Bank BPR Not hold demand (checking) deposits. Generally lends or invest funds through financial markets Asuransi Savings and Loan Similar to a saving bank. Also raise capital through the sale of securities. Lends funds for real estate mortgage loans and some funds are channeled into financial market Dana Pensiun Reksa dana Credit Union Deals primarily in transfer of funds between consumers. Accept members’ deposit and lends to other members Modal Ventura Life Insurance Company Receive premium payments that are placed in invesments to accumulate funds to cover future benefit payment Anjak-Piutang Pension Fund Sewa guna usaha Money is sometimes transferred directly to borrowers, but the majority is lent or invested via the financial markets Mutual Fund Pools funds of savers and makes them available to business and government demanders. Creates a portfolio of securities to achieve a specified investment objective

Financial Institutions and Markets: An Overview Financial Markets Provide a forum in which suppliers of funds and demanders of loans and investments can transact business directly Money Market Transactions in short-term debt instruments, or marketable securities, take place in the money market Capital Market Long-term securities (bonds and stocks) are traded in the capital market Primary market Financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transaction Secondary Market Financial market in which preowned securities (those that are not new issues) are traded

Flow of funds for financial institutions and market Financial Institutions and Markets: An Overview Financial Markets Flow of funds for financial institutions and market Funds Funds Financial Institutions Deposits/Shares Loans Funds Securities Suppliers of Funds Demanders of Funds Funds Private Placement Securities Financial Markets Funds Funds Securities Securities

Financial Institutions and Markets: An Overview The Money Market A financial relationship created between suppliers and demanders of short-term funds, which have maturities of one year or less Certain individuals, businesses, governments, and financial institution have temporary idle funds that they wish to place in some type of liquid asset or short-term, interest earning instrument Money Market exists Other individuals, businesses, gevernments, and financial institution find themselves in need of seasonal or temporary financing Most money market transactions are made in marketable securities Short-term debt instruments, such as US Treasury Bill, Commercial Papers, and Negotiables Certificate of Deposits issued by government, business, and financial institution Indonesia?

Financial Institutions and Markets: An Overview The Capital Market A financial relationship created by institutions and arrangements that allows suppliers and demanders of long-term funds- funds with maturiry of more than one year- to make transactions. Bond Long-term debt instrument used by business and governments to raise large sums of money The backbone of the capital market is formed by the various securities exchange that provide a forum for debt and and equity transaction Common stock Units of ownership interest, or equity. In a corporation Key Securities Common stockholders expect to earn a return by receiving Dividend Periodic distribution of earnings to the owners of stock in a firm Preferred stock A special form of ownership having a fixed periodic dividend that must be paid prior to payment of any common stock dividends

Major Securities Exchange Financial Institutions and Markets: An Overview The Capital Market Major Securities Exchange Provide the marketplace in which firms can raise funds through the sale of new securities and in which purchasers can resell securities 1. Organized Securities Exchanges Tangible organozations on whose premises outstanding securities are resold New York Stock Exchange (NYSE) To make transaction on the “floor”, individual or firm must own a “seat” on the exchange For “listing”, a firm must file an application and meet a number requirements Have at least 2000 stockholders with 100 ≤ shares Min 1,1 million share of publicly held stock Earning power of $2,5 million before taxes Net tangible asset of $16 million A total of $18 million in market value of publicly traded shares, etc Persyaratan “listing”? Jakarta Stock Exchange (JSX)

Major Securities Exchange Jakarta Automated Trading System Financial Institutions and Markets: An Overview The Capital Market Major Securities Exchange 2. The-Over-the-Counter Exchange (OTC) Not an organization, but an intangible market for the purchase and sale of securities not listed by the organized exchange The market price of OTC securities results from a matching of the forces of supply and demand for securities by traders known as dealer National Association of Securities Dealers Automated Quotation (NASDAQ) Sophisticated telecommunications system that provide current bid and ask prices on thousands of actively traded The bid price is the highest price offered by dealer to purchase a given security Automated matched The ask price is the lowest price at which the dealer is willing to sell the security Jakarta Automated Trading System (JATS) ?

? ? ? ? ? Interest Rates and Required Return Interest rates and required returns represent the costs of obtaining various forms of financing ? The level of funds flow between suppliers and demanders can significantly affect economic growth ? Growth results from the interaction of variety of economic factors, such as the money supply, trade balance, and economic policy, that affect the cost of money – the interest rate or required return ? The level of interest rate acts as regulating device that controls the flow of funds ? The lower the interest rate, the greater the funds flow and therefore the greater the economic growth, and vice versa ?

Interest Rate Fundamentals Interest Rates and Required Return Rate that creates an equilibrium between the supply of savings and the demand for investments funds in perfect world, without inflation, where funds suppliers and demanders have no liquidity preferences, and all outcomes are certain Interest Rate Fundamentals Interest rate The compensation paid by the borrower of funds to the lender; from the borrower’s point of view, the cost of borrowing funds Ignoring risk factors, the nominal or actual interest rate (cost of funds) results from the real rate of interest adjusted for inflationary expectation and liquidity preferences Required Return The level of return expected on equity investment General preferences of investors for shorter-term securities D So S1 The actual rate of interest chargeb by the supplier of funds and paid by demander ko* k1* Real Rate of Interest The required return on a risk-free asset, tipically a three-month US Treasury Bill (Obligasi Pemerintah) So k1= k* + IE + IC1 S1 k1= RF + IC1 D So=D S1=D Risk-free rate Risk Premium Funds supplied/demanded

Term Structure of Interest Rates Interest Rates and Required Return Term Structure of Interest Rates The relationship between the interest rate or rate of return and the time to maturity Inverted Yield Curve A Downward-sloping yield curve that indicates generally cheaper long-term borrowing costs than short-term borrowing costs Yield to maturity Annual rate of interest earned on a security purchased on a given day and held to maturity 7 8 9 10 13 14 15 16 17 Yield Curve May 22, 1981 A Graph that depicts the relationship between the yield to maturity (y-axis) and the time to maturity (x-axis) October 30, 1987 September 29, 1989 It reflects similar borrowing costs for both short- and longer-term loans 5 10 15 20 25 30 Normal Yield Curve An upward-sloping yield curve that indicates generally cheaper short-term borrowing costs than long-term- borrowing costs

Term Structure of Interest Rates Theory of Term Structure Interest Rates and Required Return Term Structure of Interest Rates Theory of Term Structure 1. Expectation Hypothesis Example Theory suggesting that the yield curve reflects investor expectations about future interest rates; an increasing inflation expectation results in upward-sloping yield curve, and vice versa Nominal interest Rate, RFt Real interest Rate, k* Inflation Expectation, IEt Maturity, t (1) (2) [(1) - (2)] 2. Liquidity Preference Theory 3 Months 5,17% 6,51 8,38 9,05 2,00% 2,00 3,17% 4,51 6,38 7,05 Theory suggesting that for any given issuer, long-term interest rates tend to be higher than sort-term rates due to the lower liquidity and higher responsiveness to general interest rate movements of longer term securities; causes the yield curve to be upward-sloping 1 years 5 years 30 years 3. Market Segmentation Theory Theory suggesting that the market for loans is segmented based on maturity and that the sources of supply and demand for loans, within each segment, determine its prevailing interest rate; the slope of yield curve is determines by the geberal relationship between the prevailing rates in each segment

Term Structure of Interest Rates Risk-Return Trade-off Interest Rates and Required Return Term Structure of Interest Rates Risk and Return Risk-Return Trade-off The expectation that for accepting greater risk, investors must be compensated with greater returns Speculative Common Stocks Qualtiy Common Stocks Preferred Stocks Medium-Grade Bonds Investment-Grade Bonds Investment-Grade Notes Annual Return (cost to issuer) Prime-Grade Commercial Paper US Treasury Bills Risk

Chapter 3 Financial Statement

? ? The Stockholders’ Report A Stockholder’s report summarizes and documents a publicly held corporation’s financial activities over the year. Who receives theses reports? What types of informastion do you think they typically include? Why are they important? ? Regulator or Goverments Creditor (lenders) Owners Management ? The letter to stockholders Events, management philosophy, strategy, and action Financial statements (a) the income statemnet, (b) the balance sheet, (c) the statement of retained earnings, and (d) the statements of cash flows Other feature Firm activities, new product, R&D, etc An important vehicle for influencing owners’ perceptions of the company and its future outlook. The stockholders’ report may effect expected risk, return, stock price, and the viability of the firm

Basic Financial Statements Income Statement Provide a financial summary of the operating results during a specified period ABC Corporation Income Statement ($000) for the year Ended December 31, 2000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Prefered stock dividends Earning available for common stockholders Earning per share (EPS) $ 1.700 1.000 $ 700 330 $ 370 70 $ 300 120 $ 180 10 $ 170 $ 1,70 $ 80 150 100 The number of common stock= 100.000

Basic Financial Statements Balance Sheet Summary statement of the firm’s financial position at given point in time ABC Corporation Balance Sheets ($000) Current assets Cash Marketable securities Account receivable Inventories Total current assets Gross fixed assets (at cost) Land and buildings Machinery and equipment Furniture and fixtures Vehicles Other Total gross fixed assets (at cost) Less: Accumulated depriciation Net fixed assets Total assets Assets 2000 2001 $ 400 $ 300 600 200 400 500 600 900 $ 2000 $ 1900 $ 1200 $ 1050 850 800 300 220 100 80 50 50 $ 2500 $ 2200 1300 1200 $ 1200 $ 1000 $ 3200 $ 2900 December 31

Basic Financial Statements Balance Sheet Summary statement of the firm’s financial position at given point in time ABC Corporation Balance Sheets ($000) Current liabilities Accounts payable Notes payable Accruals Total current liabilities Long-term debt Total liabilities Stockholders’ equity Preferred stock Common stock- $1,20 par, 100000 shares outstanding in 2000&2001 Paid in capital in excess of par on common stock Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity Liabilities and stockholders’ equity 2000 2001 $ 700 $ 500 600 700 100 200 $ 1400 $ 1400 $ 600 $ 400 $ 2000 $ 1800 $ 100 $ 100 120 120 380 380 600 500 $ 1200 $ 1100 $ 3200 $ 2900 December 31

Statement of Retained Earning Basic Financial Statements Statement of Retained Earning Reconciles the net income earned during a given year, and any cash dividends paid, with the change in retained earnings between the start and end of that year ABC Corporation Statement of Retained Earnings ($000) for the end year Ended December, 2001 Retained earnings balance (january 1, 2001) $500 Plus: Net Profit after taxes (for 2001) 180 Less: Cash dividend (paid during 2001) Preferred stock ($10) Common stock ( 70) 80 Retanined earnings balance (Dec 31, 2001) $600

Statement of Cash Flows Basic Financial Statements Statement of Cash Flows Provides a summary of the firm’s operating, investment, and financing cash flows, and reconciles them with changes in its cash and marketable securities during the period of concern ABC Corporation Statement of Cash Flows ($000) for the end year Ended December, 2001 Cash Flow from Operating Activities Net Profits after taxes $ 180 Depreciation 100 Decrease in account receivable 100 Decrease in inventories 300 Increase in account payable 200 Decrease in accruals (100) Cash provided by operating $780 Cash Flow from investment activities Increase in gross fixed asset ($300) Changes in business interest 0 Cash used for investment activities (300) Cash Flow from financing Activities Decrease in notes payable ($100) Increase in long-term debts 200 Changes in stockholders’ equity 0 Dividends paid (80) Cash provided by financing activities 20 Net increase in cash and marketable securities $500