1. 1 FINANCIAL STATEMENTS, DEPRECIATION, AND CASH FLOW The Stockholders’ Report Periodically reports must be prepared for; a.Regulators  Indonesian Stock Exchange b.Creditors  to evaluate firm’s abllity to meet scheduled debt payments c.Owners  to asses firm’s financial condition for buying or selling the stocks d.Management  regulatory compliance, satisfying creditors, owners and monitoring the firm’s performance Stockholder’s report  annual report required of publicly held corporations that summarizes and documents for stock holders the firm’s financial activities during the past year It begins with letter to the stockholders from the firm’s president followed by the key financial statements and other information about the firm. Letter to stoxkholders  the first element of annual stockholder’s report and the primary communication from management to the firm’s owners. It describes the events that have had the greatest impact on the firm during the year, management philosophy, strategies, and action as well as plans for the coming year and their anticipated effects on the firm’s financial condition

2. 2 Key Financial Statements: a.The income statements b.The balance sheet c.The statement of retained earnings d.The statement of cash flow Depreciation and Cash Flows Depreciation Depreciation  the systematic charging of a portion of the costs of fixed assets against annual revenues over time Financial manager is concerned with cash flow rather than net profit. To adjust the income statement to show cash flow from operations, all noncash charges must be added back to the firm’s net profits Noncash charges  expenses deducted on the income statement that do not involve an actual outlay of cash during the period  Depreciation, amortization, and depletion Analyzing The Firm’s Cash Flow The firm’s cash flows have been devided into: a.Operating flows  Cash inflows and outflows directly related to production and sale of products b.Investment flows  cash flows associated with purchase and sale of fixed assets and business interests c.Financing flows  cash flows that result from debt and equity financing transaction

3. 3 CASH AND MARKETABLE SECURITIES Accrued Wages Labor Accounts Payable Raw Materials Overhead Expenses Work in Process Finished Goods Operating expenses (inc. Dep) and Interest expenses Taxes Sales Account Receivables Fixed Assets Business Interest Short and Long term Debt Equity OPERATING FLOWSINVESTMENT FLOWS FINANCING FLOWS

4. 4 Classifying Sources and Uses of Cash SOURCESUSES Decrease in any assetsIncrease in any assets Increase in any liabilitiesDecrease in any liabilities Net profit after taxesNet loss Depreciation and othet noncash chargesDividend paid Sale of stocksRepurchase or retairement of stocks Developing the Statement of Cash Flows Prepare a statement of sources and uses of cash Obtain needed income statement data Properly classify and present relevant data

5. 5 Net profit after taxes in 2007 $ 180 Depreciation$100

6. 6 Baker Corporation Statement of cash flow for the year ended December 31, 2007