Managerial Finance.ppt (705Kb)
Program Magister Manajemen Universitas Gunadarma
Manajemen Keuangan Budi Hermana
Refferences: Principles of Managerial Finance, Lawrence J. Gitman, Harper Collins Publishers
The Role of Finance and The Financial Manager
Finance? 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
Areas& Opportunities? Financial Services Managerial Finance
The area of finance concerned with the design and delivery of advice and financial product to individual, business, and governments concerned with the duties of the financial manager in the business firm.
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
Task?
Budgeting Financial forecasting Cash management Credit administration Investment Analysis Funds procurement
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 S tre n g th
- Owner receives all profits (as well as losses)
- Low organizationak costs
- Income taxed as personnel income of proprietor
- Secrecy
- Ease of dissolu>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 part
- 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 >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 >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 operat>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
W ea kn es se s
The Managerial Finance Function
Managerial Finance is closely related to, but quite different from, Economics and
Accounting ?
Organizational View Since most business decisions are measured in financial terms , the financial manager plays a key role in the operation of the firm
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
Separate department, vice-president of finance (CFO),
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
Financia l Manage r
Treasurer, Controller
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 Example
Economic principle which states that financial decisions should be made and actions taken only
Benefits with new computer $100.000 when the added benefit exceed
Less: Benefits with old computer 35.000 the added costs
(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
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
Recognizes revenue at the Recognized revenues and point of sale and expenses only with respect financial data recognized expenses when to actual inflow and outflows
The financial manager evaluates incurred of cash the accountant’s statements,
Accounting View Financial View develops additional data, and makes decisions based on
Income statement Income statement subsequent analyses
ABC Corporation ABC Corporation For the year xxxx For the year xxxx This does not mean that accountant never make decision ,
Sales Revenue $100.000 Cash inflow $ 0 Less: Costs 80.000 Less: Cash Outflow 80.000 or that financial manager never gather data
Net Profit $ 20.000 Net Profit ($80.000)
The Managerial Finance Function
Key Activities of The Financial Manager Primary Activities
Performing Financial Analysis and Planning Making Investment Decisions Making Financing Decision
1. Transforming financial data into a form that can be used to monitor the firm’s financial condition
2. Evaluating the need for increased (or reduced) productive capacity
3. Determining what additional (or reduced) financing is required Determine both the mix and the type of assets found on the firm’s balance sheet
The left-hand side of the balance sheet Deals with The right-hand side of the balance sheet and involves two major area:
1. Most appropriate mix of short-term and long- term financing must be established
2. Which individual short-term or long-term sources of financing are the best at given point in time
Balance Sheet Current Assets Fixed Assets Current Liabilities Long-Term Funds
Performing Financial Analysis and Planning
M ak in g In ve st m en t
D ec is io n
M ak in g F in a nc in g
D ec is io n
The Managerial Finance Function
Goal of The Financial Manager Maximize Profit?
EPS: Some pepople believe that the owner’s objective is always
The amount earned during the
to maximize profits
period on each outstanding share The Financial Manager are expected to make a major of common stock
contribution to the firm’s overall profit For Corporation, profit are commonly measured in terms of
period’s total earnings avaliable for
Earnings per Share (EPS)
the firm’s common stock holders The number of shares of common
Earning per share (EPS)
stock outstanding
Investment year 1 year 2 year 3 total The chance that actual outcomes
X $1.40 $1.00 $0.40 $2.80
may differs from those expected
Y 0.60 1.00 1.40
3.00 √
Basic primises in managerial finance is that trade-off exist Profit maximization fails for reason:
between return (cash flow) and
1. Timing of return
risk
2. Cashflow avaliable to stockholder
3. Risk Return and risk are in fact the key
- – determinant of share price which represents the wealth of the
Stockholder are risk-averse ?
owners in the firm
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
magnitude
price of the stock
Risk
Financial decisions and share price Increase Financial Financial Decision Return?
Share Acept
Yes
Manager Alternative or action Risk? Price ?
Yes
Reject
The Managerial Finance Function
Goal of The Financial Manager The Agency Issue The goal of the financial manager should be to maximize the wealth of the owners of the firm
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 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
The likelihood that managers may place personnel goals ahead of corporate goals
Agency Cost
Monitoring expenditure Bonding expenditure Structuring expenditure Opportunity cost
To prevent or minimize problem Audit&control Fidelity bond
Managerial compensation: stock option, performance share, cash bonuses
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 Ethics and share price
Issues Update
Good Corporate Governance Corporate Social Responsibility Certified Financial Analyst
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
Responsibility Fairness Transparency Accountability
www.fcgi.or.id http://www.goodyear-indonesia.com/social_responsibility.html http://www.telkom.co.id/pojok-media/siaran-pers/telkom-memperoleh-penghargaan-corporate- social-responsibility.html
Business Taxation
Ordinary Income Income earned through the sale of a firm’s goods and services
Corporate Tax Rate Schedule Tax Calculation
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)
Example Total Tax due = $22.250 + [0.39 x ($250.000-100.000)] PT X has before-tax earnings of $250.000 = $22.250 + (0.39 x $150.000) = $22.250 + $58.500 = $80.750
Indonesia ?
Business Taxation
Ordinary Income Average Tax Rates A Firm’s taxes divided by its taxable income
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
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% 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)
The rate at which additional income is taxed
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
Business Taxation
Ordinary Income Interest and Dividend Income Interest received by the
Only 30% of these Devidend received on corporation is included as
intercorporate
common and preferred stock
ordinary income dividends are
held in other corporation, included as and representing less than
ordinary income
20% ownership in them, on the other hand, are subject
Avoid triple
to a 70% exclusion for tax
taxation
puposes
Example
Charnes Industries received
Dividend Interest
$100.000 interest on bonds
Income Income
it held and $100.000 in dividends on common stock $100.000 $100.000
(1) Before-tax amount
it owned in other
(0,70x$100.000) = 70.000 Less: Applicable Exclusion
corporation. The firm is $100.000 $ 30.000
Taxable amount
subject to a 40% marginal- 40.000 12.000
(2) Tax (40%)
tax rate and is eligible for $ 60.000
$ 88.000
After-tax amount (1)-(2)
70% exclusion on its intercorporate dividend
Indonesia ?
receipts
Business Taxation
Ordinary Income Tax-Deductible Expenses
Advertising expenses Corporation are allowed to deducti
operating expenses . The tax- Insurance?
deductible expenses reduces their Sales commision after-tax cost.
Bad debt
CSR?
Interest expenses
Example
Company X and Y each expect in the
Dividend Interest
Income
coming year to have earnings before
Income
interest and taxes of $200.000. Company X $200.000
$200.000 during the year will have to pay $30.000 in Earning before interest&tax 30.000
Less: Interest expenses
interest; Company Y has no debt and therefore will have no interest expenses.
$170.000 $200.000
Earnings before tax
Calculate the earnings after taxes for these 68.000 80.000
Less: Taxes (40%)
two firm, which pay 40% tax on ordinary $ 102.000 $120.000
Earnings after taxes
income
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 Financial Market
Private placement
That accept savings and transfers them to those
needing funds
Organized forum where the suppliers and demanders of various type of funds can make transaction
Financial Institutions and Markets: An Overview
Financial Institution An intermediary that channels of the savings individuals, businesses, and governments into loans or investment
Major Financial Institutions USA
Indonesia Commercial Bank Accepts both demand (checking) and time (savings)
Bank Umum deposits. Makes loans directly to borrowers or through the financial market
BPR Savings Bank
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
Dana Pensiun sale of securities. Lends funds for real estate mortgage loans and some funds are channeled into financial market
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
Anjak-Piutang Receive premium payments that are placed in invesments to accumulate funds to cover future benefit payment
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
Money Market
Provide a forum in which suppliers of funds and demanders of loans and investments
Transactions in short-term debt instruments, or
can transact business directly
marketable securities, take place in the money market Capital Market securities (bonds and stocks) are
Long-term
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
Financial Institutions and Markets: An Overview
Financial Markets
Flow of funds for financial institutions and market
Financial
Institutions
Financial
Markets
Suppliers of FundsFunds Funds
Demanders of Funds Funds
Funds F u n d s Deposits/Shares Loans
Private Placement
Securities
Securities S ec u rit ie s Funds 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
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?
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 Other individuals, businesses, gevernments, and financial institution find themselves in need
of seasonal or temporary financing Money Market exists
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.
The backbone of the capital market is formed by the various securities exchange that provide a forum for debt and and equity transaction
Bond Long-term debt instrument used by business and governments to raise large sums of money
Common stock Units of ownership interest, or equity. In a corporation Common stockholders expect to earn a return by receiving Dividend
Key Securities
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
Financial Institutions and Markets: An Overview
The Capital Market Major Securities Exchange
1. Organized Securities Exchanges Provide the marketplace in which firms can raise funds through the sale of new
securities and in which
purchasers can resell
securities
Tangible organozations on whose premises outstanding securities are resold
New York Stock Exchange (NYSE) Jakarta Stock Exchange (JSX)
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”?
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 The ask price is the lowest price at
Automated
by dealer to purchase a given security which the dealer is willing to sell the
matched securityJakarta 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 Rates and Required Return
Rate that creates an equilibrium Interest Rate Fundamentals between the supply of savings and the demand for investments funds in perfect
Interest rate
world, without inflation , where funds suppliers and demanders have no The compensation paid by the borrower of liquidity preferences, and all funds to the lender; from the borrower’s outcomes are certain point of view, the cost of borrowing funds Ignoring risk factors, the nominal or actual interest rate (cost of funds) results from the
Required Return
real rate of interest adjusted for inflationary expectation and liquidity preferences The level of return expected on equity investment
General preferences of D investors for shorter-term
S o securities
S 1 t
The actual rate of interest s
- * k o
re chargeb by the supplier of funds te and paid by demander
In
- * k 1 f o
The required return on a risk-free te S o asset, tipically a three-month US a k = k* + IE + IC
R
1
1 Treasury Bill (Obligasi Pemerintah) l a e S 1 R k = R + IC
1 F
1 D Risk-free Risk S =D S =D o 1 rate Premium Funds supplied/demanded
Interest Rates and Required Return
17
It reflects similar borrowing costs for both short- and longer-term loans
Normal Yield Curve An upward-sloping yield curve that indicates generally cheaper short-term borrowing costs than long-term- borrowing costs
September 29, 1989 Inverted Yield Curve A Downward-sloping yield curve that indicates generally cheaper long-term borrowing costs than short-term borrowing costs
30 May 22, 1981 October 30, 1987
25
20
15
10
5
Term Structure of Interest Rates The relationship between the interest rate or rate of return and the time to maturity
Annual rate of interest earned on a security purchased on a given day and held to maturity
15
14
13
10
9
8
7
A Graph that depicts the relationship between the yield to maturity (y-axis) and the time to maturity (x-axis)
Yield to maturity Yield Curve
16
Interest Rates and Required Return
Term Structure of Interest Rates Theory of Term Structure
1. Expectation Hypothesis
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
2. Liquidity Preference Theory
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
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
Example Nominal interest Rate, R Ft Real interest Rate, k*
Inflation Expectation,
IE t Maturity, t (1) (2) [(1) - (2)]
3 Months 1 years 5 years 30 years
5,17% 6,51 8,38 9,05
2,00% 2,00 2,00 2,00
3,17% 4,51 6,38 7,05
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 r) e
Medium-Grade Bonds su is
Investment-Grade Bonds o t st
Investment-Grade Notes co ( rn
Prime-Grade Commercial Paper tu e
US Treasury Bills l R a u n n A
Risk
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?
?
1. Regulator or Goverments
2. Creditor (lenders)
3. Owners
4. Management ?
1. The letter to stockholders An important vehicle for Events, management influencing owners’ philosophy, strategy, and perceptions of the company and action its future outlook .
2. Financial statements (a) the income statemnet, (b) The stockholders’ report may the balance sheet, (c) the effect expected risk, return, statement of retained stock price, and the viability earnings, and (d) the of the firm statements of cash flows
3. Other feature Firm activities, new product, R&D, etc
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
$ 1.700 Less: Cost of goods sold
1.000 Gross profits $ 700
Less: Operating expenses Selling expense $ 80 General and administrative expense 150 Depreciation expense 100 Total operating expense 330
Operating profits $ 370
Less: Interest expense
70 Net profits before taxes $ 300
Less: Taxes (rate = 40%) 120 Net profits after taxes $ 180
Less: Prefered stock dividends
10 The number of Earning available for common stockholders $ 170 common stock=
Earning per share (EPS) $ 1,70
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) December 31
Liabilities and stockholders’ equity 2000 2001
Current liabilities Accounts payable $ 700 $ 500 Notes payable
600 700 Accruals
100 200 Total current liabilities $ 1400 $ 1400 Long-term debt
$ 600 $ 400 Total liabilities $ 2000 $ 1800 Stockholders’ equity Preferred stock $ 100 $ 100 Common stock- $1,20 par, 100000 shares outstanding in 2000&2001 120 120 Paid in capital in excess of par on common stock 380 380 Retained earnings 600 500 Total stockholders’ equity $ 1200 $ 1100 Total liabilities and stockholders’ equity $ 3200 $ 2900
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
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, 2001Cash 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 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 Dividends paid
(80) Cash provided by financing activities
20 Net increase in cash and marketable securities $500