NERACA PT GR 31 DESEMBER 2011 DAN 31 DESEMBER 2012 (JUTA RUPIAH)

AKTIVA 2011 2012 PASIVA 2011 2012

KAS 32 30 HUTANG DAGANG 87 40
SURAT2 BERHARGA 75 70 HUTANG WESEL 210 150
PIUTANG 250 200 HUTANG BANK 400 425
PSDN BRG JADI 200 100 HUTANG LAINNYA 25 25
PSDN BRG DLM PROSES 150 100 HUTANG PAJAK 125 120
PSDN BHN MENTAH 300 200 HUTANG LANCAR 847 760
AKTIVA LANCAR 1.007 700
HUTANG JK PANJANG 600 540
PABRIK & PERLENGKAPAN 2.000 2.300 SAHAM BIASA (500.000 LEMBAR) 700 700
(─) AKUMULASI PENYUSUTAN 400 500 LABA DITAHAN 460 500
PABRIK &PLKPAN (NETO) 1.600 1.800 TOTAL MODAL SENDIRI 1.160 1.200
TOTAL AKTIVA 2.607 2.500 TOTAL PASIVA 2.607 2.500

LAPORAN LABA RUGI PT GR 31 DESEMBER 2012 (JUTA RUPIAH)

PENJUALAN 3.600
HARGA POKOK PENJUALAN :
PERSDN AWAL BRG JADI 200
+ HARGA POKOK PRODUKSI (LIHAT SKEDUL) 2.600
HARGA POKOK BRG TERSEDIA UTK DIJUAL 2.800
─ PERSDN AKHIR BRG JADI 100
HARGA POKOK PENJUALAN 2.700
LABA KOTOR 900
BIAYA OPERASI (ADMINISTRASI, PENJUALAN, UMUM) 200
PENYUSUTAN 100
LABA OPERASI (EBIT) 600
BUNGA 150
LABA SEBELUM PAJAK (EBT) 450
PAJAK (40%) 180
LABA BERSIH SETELAH PAJAK (EAT) 270

SKEDUL HARGA POKOK PRODUKSI (JUTA RUPIAH)

BAHAN MENTAH :
PERSEDIAAN AWAL (31 DESEMBER 2011) 300
+ PEMBELIAN BAHAN MENTAH 1.500
BAHAN MENTAH TERSEDIA UNTUK DIGUNAKAN 1.800
─ PERSEDIAAN AKHIR (31 DESEMBER 2012) 200
BAHAN MENTAH YG DIGUNAKAN 1.600
BIAYA TENAGA KERJA LANGSUNG 450
BIAYA OVERHEAD PABRIK 500
BIAYA PRODUKSI TAHUN 2012 2.550
+ PERSEDIAAN BARANG DALAM PROSES AWAL (31 DESEMBER 2011) 150
BIAYA PRODUKSI YG DIPERHITUNGKAN 2.700
─ PERSEDIAAN BARANG DALAM PROSES AKHIR (31 DESEMBER 2012) 100
HARGA POKOK PRODUKSI 2.600

LAPORAN LABA YANG DITAHAN TAHUN 2012 (JUTA RUPIAH)

SALDO LABA YANG DITAHAN AWAL (31 DESEMBER 2011) 460
+ LABA BERSIH 2012 270
730
─ DIVIDEN KEPADA PARA PEMEGANG SAHAM 230
SALDO LABA YANG DITAHAN AKHIR (31 DESEMBER 2012) 500

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COMPUTING TAXABLE INCOME

 The taxable income for a corporation is based on the gross income from all sources less any tax-deductible
expenses.
 Gross income equals the firm’s dollar sales from its product less the cost of producing or acquiring the
product.
 Tax-deductible expenses include any operating expenses, such as marketing expenses, administrative
expenses, and depreciation expense.
 Also, interest expense paid on the firm’s outstanding debt is a tax-deductible expense.
 However, dividends paid to firm’s stockholders are not deductible expenses, but rather distributions of
income.
To demonstrate how to compute a corporation’s taxable income, consider the J&S Corporation, a manufacturer of
home accessories.
The firm had sales of $50 million for the year.
The cost of producing the accessories totaled $23 million.
Operating expenses were $10 million.
The corporation has $12.5 million in debt outstanding with an 8% interest rate, which resulted in $1 million in
interest expense ($12,500,000x.08=$1,000,000).
Management paid $1 million in dividends to the firm’s common stockholders.
The taxable income for the J&S Corporation would be $16 million, as shown in Table 1.

TABLE 1. J&S Corporation Taxable Income

Sales $50,000,000
Cost of goods sold (23,000,000)
Gross profit $27,000,000
Operating expenses
Administration expenses $4,000,000
Depreciation expenses $1,500,000
Marketing expenses $4,500,000
Total operating expenses (10,000,000)
Operating income (earning before interest and taxes) $17,000,000
Interest expense (1,000,000)
Taxable income $16,000,000
Note: Dividends paid to common stockholders ($1,000,000) are not tax-deductible.

COMPUTING THE TAX OWED

The taxes to be paid by a corporation on its taxable income are based on the corporate tax rate structure as given
in Table 2. If you wonder about the economic rationale for the rates, don’t waste your time. There is none.
Politicians, not economists, determine the rates.

TABLE 2. Corporate Tax Rates

RATES INCOME LEVELS
15% $0-$50,000
25% $50,001-$75,000
34% $75,001-$100,000
39% $100,001-$335,000
34% $335,001-$10,000,000
35% $10,000,001-$15,000,000
38% $15,000,001-18,333,333
34% Over $18,333,333

Based on the tax rates, J&S Corporation’s tax laibility would be $5,530,000 as computed in Table 3.

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TABLE 3. Tax Calculation for J&S Corporation
EARNINGS X MARGINAL TAX RATE = TAXES
$50,000 X 15% =$ 7,500
$75,000−$50,000 X 25% =$ 6,250
$100,000−$75,000 X 34% =$ 8,500
$335,000−$100,000 X 39% =$ 91,650
$10,000,000−$335,000 X 34% =$3,286,000
$15,000,000−$10,000,000 X 35% =$1,750,000
$16,000,000−$15,000,000 X 38% =$ 380,000
Total tax liability $5,530,000

MEASURING FREE CASH FLOW

Free Cash Flow - adalah kas yang tersedia untuk didistribusikan pada para investor perusahaan (creditor & owners)
yang berasal dari operasi perusahaan setelah berinvestasi pada modal kerja (neto) dan aktiva tetap (gross).

Perhitungan Free Cash Flow dapat dilakukan dengan dua perspektif : 1. Assets Perspective
2. Financing Perspective

(+) CF from Assets =(─) CF from Financing demikian sebaliknya (─) CF from Assets= (+) CF from Financing
Jadi harus balance !

Bila Cash Flow (+) dari Assets Perspective ini berarti perusahaan dapat menghasilkan uang lebih banyak dari
operasinya dan dapat didistribusikan pada investornya (creditor & owners).

Bila Cash Flow (─) dari Assets Perspective ini berarti perusahaan menghasilkan uang lebih sedikit dari operasinya
dan investor yang menanggung atas kekurangan tersebut.

Income statement mengukur company’s profit, tetapi profit tidak sama dengan cash flow.
Profit calculated on accrual basis, yaitu dicatat dan diakui saat terjadi transaksi walaupun uangnya belum diterima
atau belum dibayarkan (bisa income ataupun expenses).

Menghitung Free Cash Flow : Asset Perspective

FCF = After Tax CF from Operations ─ Investment in Assets

After Tax CF from Operations =(EBIT + DEPRECIATION) ─ CASH TAXES

Cash Taxes = Provision Income Taxes ─ change in Income Tax Payable
Investment in Assets = change in net working capital + change in gross Fixed Assets & Other Assets
Change in net WC = change in Current Assets ─ change in non-interest bearing Current Liabilities

Menghitung Free Cash Flow : Financing Perspective

1. Pay interest to creditor

2. Pay dividend to shareholder/stockholder
3. Increase (+)/Decrease (─) Debt (short & long term debt)
4. Isuue (+) or Repurchase(─) stock from current Investor

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TABLE 2.1 Harley-Davidson, Inc. Annual Income Statement for the Year Ending December 31, 2002
2002
Sales $4,195,197
Cost of goods sold 2,673,129 Income from operating
Gross profit 1,522,068 activities
Selling, general, and administration expenses 465,831
Depreciation 160,119
Total operating expenses $ 625,950 Cost of debt
financing
Operating profit (EBIT/Op.Income) $ 896,118
Interest expense 17,849
Earning before taxes 878,269 Income resulting from
Provision for income taxes 298,052 Operating and financing
Net income $ 580,217 activities

TABLE 2.2 Harley-Davidson Inc. Annual Balance Sheet ($000)

12/31/01 12/31/02
ASSETS CHANGE
Cash $ 635,449 $ 795,728 $160,279
Account receivable 775,264 964,465 189,201
Inventories 181,115 218,156 37,041
Other current assets 73,436 88,237 14,801
Total current assets $1,665,264 $2,066,586 $401,322
Gross plant, property & equipment $1,705,361 $2,006,256 $300,895
Accumulated depreciation (813,541) (973,660)
Net plant, property, and equipment $ 891,820 $1,032,596
Other assets 561,411 762,035 200,624
Total assets $3,118,495 $3,861,217 $742,722

LIABILITIES AND EQUITY

LIABILITIES
Account payable $ 217,051 $ 382,579 $165,528
Accrued expense 194,683 226,977 32,294
Income taxes payable 65,875 67,886 2,011
Short-term notes 141,191 189,024 47,833
Other interest bearing current liabilities 97,310 123,586 26,276
Total current liabilities $ 7 16,110 $ 990, 052 $273,942
Long-term debt 646,102 $ 638,250 (7,852)
Total liabilities $1,362,212 $1,628,302 $266,090

COMMON EQUITY
Common stock (par value) $ 3,242 $ 3,254 $ 12
Paid in capital 359,165 $ 386,284 27,119
Retained earnings 1,819,422 2,325,737 506,315
Less treasury stock (425,546) (482,360) (56,814)
Total common equity $1,756,283 $2,232,915 $476,632
Total liabilities and equity $3,118.495 $3,861,217 $742,722

HARLEY-DAVIDSON INC.
RECONCILIATION OF RETAINED EARNINGS
Retained earnings, December 31, 2001 $1,819,422
2002 net income $ 580,217

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Dividends paid $ 73,902
Retained earnings, December 31, 2002 $2,325,737
FREE CASH FLOW ASSETS PERSPECTIVE
1. Convert the I/S from an accrual basis to a cash basis (compute after-tax cash flows from operations).
After Tax Cash Flow from Operations :
EBIT (see I/S) $ 896,118
Depreciation (see I/S) $ 160,119
EBITDA (Earning before interest, tax, depreciation & amortization) $1,056,237
Cash Taxes
Provision for income taxes (see I/S) $298,052
Less change in income tax payable (see B/S) $ 2,011
Cash Taxes $ 296,041
After Tax Cash Flow from Operations $ 760,196

Note that we made an adjustment in computing the taxes HD actually paid, as opposed to what is shown in the I/S,
or what is called cash.
The I/S indicated that the provision for income taxes was $298,052.
However, look at the B/S and notice that income taxes payable increased $2,011 from Dec 31, 2001 to Dec 31,
2002. Why would that be?
Simply put, management did not pay the full $298,052 in taxes. Rather they accrued $2,011 of these taxes instead
of paying them.
So the cash taxes are computed as follows:
Provision for income taxes $298,052
Change in income taxes payable $ 2,011 −
Cash taxes $296,041

2. Calculate the investment in net operating working capital.

Change in Net Working Capital :
Change in Current Assets $401,322
Change in Account Payable $165,528
Change in Accrued Expenses $ 32,294
Change in non-interest bearing Current Liabilities $197,822
Change in Net Working Capital $203,500

Note: non-interest bearing current liabilities adalah current liabilities selain debt.

3. Compute investment made in fixed assets and other assets (investment activities).
Change in Gross Fixed Assets $300,895
Change in Other Assets $200,624
Total increase in long-term assets $501,519

FREE CASH FLOW ASSET PERSPECTIVE = AFTER TAX CF FROM OPERATION ─ INVESTMENT IN ASSETS

FCF ASSET PERSPECTIVE = $760,196 ─ ($203,500 + $501,519)

= $55,177 → POSITIF
Jadi $55,177 dapat didistribusikan pada investor Harley Davidson.

SOAL: Jumlah penjuahun tahun lalu Davies, Inc. mencapai $4,000,000. Laba kotor (gross profit $1,000,000, biaya
operasi dan biaya depresiasi (penyusutan) adalah $500,000 & $350,000. Hitung kewajiban pajaknya.

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FREE CASH FLOW FINANCING PERSPECTIVE

A firm can either receive money from or distribute money to its investors, or some of both.
In genereal, cash flows between investors and the firm occur in one of four ways:

1. Pay interest to creditors.

2. Pay dividends to stockholders.
3. Increase or decrease outstanding debt.
4. Issue or repurchase stock from current investors.

Looking at Harley-Davidson’s income statement and the changes in the balance sheets, we see that cash was paid
to the firm’s investors in the following four ways:

1. Payment of interest to the creditors (income statement)

2. Payment of dividends to the common stockholders (below balance sheet)
3. Reducing the amount of long-term debt outstanding (decrease in long-term debt in the balance sheet)
4. Repurchasing more stock than was issued by the firm (increase in treasury stock less the increase in common
stock and paid in capital)

However, the firm received additional financing from its creditors as indicated by the increases in the following
interest-bearing current liabilities in the balance sheet:

1. Interest-bearing short-term notes

2. Other interest-bearing current liabilities

Let’s compute the actual amounts of Harley-Davidson.

Interest paid to creditor (see I/S) ($17,849)

Dividend paid to owners (see B/S) ($73,902)
($91,751)
Changes in debt:
Increase in interest-bearing short-term notes (see B/S) $47,833
Increase in other interest-bearing current liabilities (see B/S) $26,276
Decrease in long-term debt (see B/S) ($ 7,852)
Net stock Repurchase ($12 + $27,119) ─ $56,814 (see B/S) ($29,683)
FREE CASH FLOW FINANCING PERSPECTIVE ($55,177)

Thus, the firm paid $17,849 in interest & $73,902 in dividends, paid off $7,852 in long-term debt and repurchased
$29,683, net of new stock issued ($27,131 increase in par & paid-in capital − $56,814 stock repurchased).
However, HD received money from the firm’s short-term creditors in the amount of $74,109 ($47,833+$26,276).
Add it all up and HD paid at a net amount of $55,177 to its creditors and shareholders.

WHAT HAVE WE LEARNED FROM HARLEY-DAVIDSON Inc.’s FINANCIAL STATEMENTS?

1. For every dollar of sales, HD earns $.36 in gross profits, $.21 in operating income, & $.138 in net income.
2. Most of firm’s investments are in current assets & in fixed assets.
3. The firm finances its assets using about 42 percent debt & 58 percent equity.
4. HD has positive cash flow from assets because the company generated more money from operations than
invested.
5. The company increased its working capital (current assets), plant & equipment, and other assets.
6. In net, $55,177 million were distributed to HD’s investors.

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PR : DI EMAIL KE adjiprabawa1959@gmail.com paling lambat 5 Oktober 2020 pukul 09.00 pagi.
Jawaban diketik dalam format word font 10. Be on time and no tolerance time.

Neff Industries Balance Sheet for December 31, 2002 and December 31, 2003
2002 2003
Cash $ 9,000 $ 500
Account receivable $ 12,500 $ 16,000
Inventories $ 29,000 $ 45,500
Total current assets $ 50,500 $ 62,000
Land $ 20,000 $ 26,000
Buildings & equipment $ 70,000 $100,000
Less: allowance for depreciation ($ 28,000) ($ 38,000)
Total fixed assets $ 62,000 $ 88,000
Total assets $112,500 $150,000

Account payable $ 10,500 $ 22,000

Bank notes $ 17,000 $ 47,000
Total current liabilities $ 27,500 $ 69,000
Long-term debt $ 28,750 $ 22,950
Common stock $ 31,500 $ 31,500
Retained earnings $ 24,750 $ 26,550
Total liabilities & equity $112,500 $150,000

Neff Industries Income Statement for the Years Ended December 31, 2002, and December 31, 2003
2002 2003
Sales $125,000 $160,000
Cost of goods sold 75,000 96,000
Gross profit $ 50,000 $ 64,000
Operating expense
Fixed cash operating expense $ 21,000 $ 21,000
Variable operating expense $ 12,500 $ 16,000
Depreciation $ 4,500 $ 10,000
Total operating expense $ 38,000 $ 47,000
Earning before interest and taxes $ 12,000 $ 17,000
Interest $ 3,000 $ 6,100
Earning before taxes $ 9,000 $ 10,900
Taxes $ 4,500 $ 5,450
Net income $ 4,500 $ 5,450

1. Hitunglah Cash Flow dari asset perspective dan financing perspective.

2. Apa kesimpulan yang dapat diambil dari point 1.

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Neff Industries Balance Sheet for December 31, 2002 and December 31, 2003
2002 2003 CHANGE
Cash $ 9,000 $ 500 ($ 8,500)
Account receivable $ 12,500 $ 16,000 $ 3,500
Inventories $ 29,000 $ 45,500 $16,000
Total current assets $ 50,500 $ 62,000 $11,500
Land $ 20,000 $ 26,000 $ 6,000
Buildings & equipment $ 70,000 $100,000 $30,000
Less: allowance for depreciation ($ 28,000) ($ 38,000) -
Total fixed assets $ 62,000 $ 88,000 -
Total assets $112,500 $150,000 $37,500

Account payable $ 10,500 $ 22,000 $11,500

Bank notes $ 17,000 $ 47,000 $30,000
Total current liabilities $ 27,500 $ 69,000 $41,500
Long-term debt $ 28,750 $ 22,950 ($ 5,800)
Common stock $ 31,500 $ 31,500 -
Retained earnings $ 24,750 $ 26,550 $ 1,800
Total liabilities & equity $112,500 $150,000 $37,500

Neff Industries
RECONCILIATION OF RETAINED EARNINGS
Retained earnings, Dec 31, 2002 $24,750
2003 net income $ 5,450
Dividends paid ($ 3,650)
Retained earnings, Dec 31, 2003 $26,550

BEBERAPA ISTILAH:
Preferred stockholders receive a dividend that a fixed in amount.
In the event of liquidation of the firm, these stockholders are paid after the firm’s creditors, but before the
common stockholders.
Common stockholders are the residual owners of a business.
They receive whatever is left over – good or bad – after the creditors and preferred stockholders are paid.
The amount of a firm’s common equity as reported in the balance sheet is equal to
(1) the amount the company received from seling stock to investors plus
(2) the firm’s retained earnings.
The amount the firm receives from selling stock is recorded in the common equity section in the account of par
value and paid-in capital.
These amounts may be offset by any stock that has been repurchased by the company, which is typically shown as
treasury stock.
Retained earnings is the cumulative total all the net income over the firm’s life less the common stock dividends
that have been paid over the years.
Thus, the common equity capital consists of the following:
Common shareholder’ equity = common stock issued – common stock repurchased + cumulative net income over
the firm’s life – total dividends paid over the firm’s life

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Which is shown in the balance sheet as:
Common shareholders’ equity = (par value + paid-in capital) – treasury stock + retained earnings

EVALUATING A FIRM’S FINANCIAL PERFORMANCE

Financial Ratio Analysis
The DuPont Analysis
Firm Performance and Shareholder Value

Four question as a map in using financial ratios:

1. How liquid is the firm?
2. Is management generating adequate operating profits on the firm’s assets?
3. How is the firm financing its assets?
4. Are the owners (stockholders) receiving an adequate return on their investment?

1. How liquid is the firm?

Firm’s liquidity is its ability to meet maturing debt obligations (short-term debt) and the ability to convert account
receivables and inventories into cash on a timely basis.

Measuring Liquidity:
Approach 1: The first approach compares cash and the asets that should be converted into cash within the year
with the debt (liabilities) that is coming due in the near term.

current assets
Current ratio = (1)
current liabilities

current assets − inventories

Acid-test ratio = (2)
current liabilities

Approach 2: The second approach examines the firm’s ability to convert account receivable and inventory into cash
on a timely basis.
accounts receivable
Average collection period = (3)
daily credit sales (credit sales : 365 days)

credit sales
Account receivable turnover = (4)
accounts receivable

cost of goods sold

Inventory turnover = (5)
inventory

2. Is management generating adequate operating profits on the firm’s assets?

Operating income return on investment indicates the effectiveness of management at generating operating profits
on the firm’s assets.
operating income
Operating income return on investment = (6)
total assets

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OIROI can separate into OPM and TATO as follows:
OIROI = (Operating profit margin) x (total assets turnover)
OPM = Operating Income : Sales
TATO = Sales : Total assets
3. How is the firm financing its assets?
Debt ratio indicates how much debt (short-term debt and long-term debt) is used to finance a firm’s assets.

Total debt
Debt ratio = (7)

Total assets

Times interest earned indicates a firm;s ability to cover its interest expense, as measured by its earning before
interest and taxes relative to the interest expense.

Operating income
Times interest earned = (8)
Interest expense

4. Are the owners (stockholders) receiving an adequate return on their investment?

Net income
Return on common equity = (9)
Common equity

Note: Common equity including par, paid-in capital, and retained earnings.

TABLE 3.3 HARLEY-DAVIDSON’S FINANCIAL RATIO ANALYSIS

FINANCIAL RATIOS HARLEY-DAVIDSON PEER GROUP AVERAGE
1. LIQUIDITY
Current ratio 2.09 times 1.50 times
Acid-test ratio 1.87 times 1.06 times
Average collection period 83.9 days 75 days
Account receivable turnover 4.35 times/yr 4.87 times/yr
Inventory turnover 12.26 times/yr 5.78 times/yr

2. OPERATING PROFITABILITY
Operating income return on investment 23.2% 9.8%
Operating profit margin 21.4% 8.3%
Total assets turnover 1.09 times 1.18 times
Account receivable turnover 4.35 times/yr 4.87 times/yr
Inventory turnover 12.26 times/yr 5.78 times/yr
Fixed assets turnover 4.06 times/yr 4.26 times/yr

3. FINANCING DECISION
Debt ratio 42.2% 58%
Times interest earned 50.2 times 3.93 times

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4. RETURN ON EQUITY
Return on equity 26% 12%

LIQUIDITY:
1. HD is more liquid than the average peer group firm (current ratio & acid-test ratio)
2. HD takes just a little longer to collect its receivables than the average firm in the comparison group.
3. HD is somewhat slower at collecting its receivables than competing firms.
4. HD is clearly excellent in its management of inventory

OPERATING PROFITABILITY
1. HD management is generating significantly more income on $1 of assets than similar firms.
2. HD management is extremely effective in managing driving forces of the operating profit margin.
3. HD utilizes its assets less efficiently than does its peer group.

FINANCING DECISION
1. HD uses significantly less debt than the average firm in the peer group.
2. HD is well able to service its interest expense without any difficulty.

RETURN ON EQUITY
1. Clearly, the owners of HD are receiving a return on their investment than peer group owners.

To help us understand foregoing conclusion about the use of debt and its effect on shareholder return, consider
the following example.

Firms A & B are identical in size ($1,000 in Total Assets). Both firms have OIROI of 14%.
Firm A uses no debt, but firm B uses 60% debt at an interest of 10%.
For simplicity we assume there are no income taxes.
FIRM A FIRM B
Total assets $1,000 $1,000
Debt (10% interest rate) $ 0 $ 600
Equity $1,000 $ 400
Total debt & equity $1,000 $1,000
Operating income $ 140 $ 140
Interest expense $ 0 $ 60
Net profit $ 140 $ 80

ROE = Net income/Common equity

ROE Firm A = $140/$1,000 = 14%
ROE Firm B = $80/$400 = 20%

Assume now that the economy falls into a deep recession, business declines sharply, and firm A and B only earn a
6% OIROI. Let’s recompute the return on common equity now.

FIRM A FIRM B
OIROI = 6% $60 $60
Interest expense $ 0 $60
Net profit $60 $ 0

ROE = Net income/Common equity

ROE Firm A = $60/$1,000 = 6%

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ROE Firm B = $0/$400 = 0%

DuPont Analysis: Harley-Davidson

Return on Equity = 26%

Return on Assets = 15.04% divided by 1 – (Total Debt :Total Assets) =

1 – ($1,628,302 : $3,861,217)=
1 – 0.422 = 0.578

Net Profit Margin = 13.8% multiplied by Total Assets Turnover = 1.09

Net Income = divided by Sales = Sales = divided by Total Assets =

$580,217 $4,195,197 $4,195,197 $3,861,217

Sales =
$4,195,197

less
Total Cost & Expenses = Current Assets = Fixed Assets = Other Assets =
$3,614,980 $2,066,586 $1,032,596 $762,035

Costs of Goods sold = Cash = $795,728

$2,673,129

Cash Operating Expenses = Account Receivable =

$465,831 $964,465

Depreciation = $160,119 Inventory = $218,156

Interest Expense = $17,849

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 Other Current Assets =
$88,237

Taxes = $298,052

Firm Performance and Shareholder Value

Up to this point, we have considered firm performance only from accounting perspective. We
concluded that management is performing better than its competition, but we never said
whether Harley-Davidson is creating or destroying shareholder value from its investments.

How is shareholder value created or destroyed?

Shareholder value is created when a firm earns a rate of return on the capital invested in excess
of the investor’s required rate of return.

If we invest in a firm and have a 12 percent required rate of return, and the firm earns 15
percent on our capital, then management is creating value for the investor.

If instead, the firm only earns 10 percent, then investor value is being destroyed.

Instead, most managers are more focused on the accounting results – earnings growth, profit
margins, and the return on equity.

Although several techniques have been developed for assessing whether management is
creating shareholder value, the one seeming to capture the most attention presently is
economic value added (EVA®).

This approach, developed by the consulting firm Stern Stewart & Co., is an attempt to measure
a firm’s economic profit rather than accounting profit in a given year.

EVA® = (r – k) x C

where; r =.the firm’s operating income return on invested capital

k = total cost of all capital (both debt and equity)
C = amount of capital (total assets) invested in the firm

Bila diketahui r=16%; k=13% dan C= $1,000

EVA = (16% − 13%) X $1,000 = $30

EVA POSITIF BERARTI CREATING VALUE DAN BILA NEGATIF MAKA DESTROYING VALUE.

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