Financial Statements, Cash Flow, and Taxes: Financial Statements The focus on financial statements in finance is how managers and investors interpret and use them. A firm's annual report contains both verbal and quantitative information. The quantitative information consists of four financial statements: (1) Balance Sheet, (2) Income Statement, (3) Statement of Cash Flows, and (4) Statement of Stockholders' Equity. The balance sheet shows the firm's assets and claims against those assets. In other words, assets are equal to liabilities and equity. Assets are shown in order of their -Select- and claims are listed in the order of when they must be paid. Current assets include cash and their equivalents, accounts -Select- and inventory, while long-term assets are those whose useful lives exceed one year. Liabilities are divided into | -Select- and long-term debt. We differentiate between total debt and total liabilities. A company's total debt includes both its short-term and long-term -Select- liabilities. Total liabilities equal -Select- plus the company's "free" liabilities. -Select- is equal to operating current assets (calculated as is capital supplied by common stockholders and represents ownership. is the difference between current assets and current liabilities, while |-Select- current assets minus excess cash) less operating current liabilities. -Select- The income statement reports on operations over a period of time. Companies' operating performances can be compared by looking at each firm's EBIT, often referred to as -Select- A typical stockholder focuses on the bottom line of the income statement, [-Select- The income statement is tied to the -Select- through the retained earnings account. Net income minus [-Select- paid is equal to the retained earnings for the year, and this amount is added to the cumulative retained earnings from prior years to obtain the year-end retained earnings balance. the asset is expected to produce. Management's goal is to maximize the firm's intrinsic value. The value of any asset, including a share of stock, is based on the [-Select- Therefore, managers strive to maximize the -Select- available to investors. The statement of cash flows shows how much -Select- a firm is generating. It is divided into four parts: (1) Operating activities, (2) Investing activities, (3) Financing activities, and (4) Summary. Changes in stockholders' equity during an accounting issues, stock repurchases, net income, and [-Select- period are reported in the statement of stockholders' equity. Changes in stockholders' equity can come from new stock paid. Quantitative Problem: Rosnan Industries' 2020 and 2019 balance sheets and income statements are shown below. Balance Sheets: 2020 2019 Cash and equivalents Accounts receivable Inventories Total current assets Net plant and equipment Total assets Accounts payable Accruals Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total common equity Total liabilities and equity $100 275 375 $750 2,300 $3,050 $150 75 150 $375 450 1,225 1,000 $2,225 $3,050 $85 300 250 $635 1,490 $2,125 $85 50 75 $210 290 1,225 400 $1,625 $2,125 Income Statements: 2020 2019 Sales $2,285 $1,585 Operating costs excluding depreciation 1,250 1,000 EBITDA $1,035 $585 Depreciation and amortization 100 75 EBIT $935 $510 Interest 63 46 EBT $872 $464 Taxes (25%) 218 116 Net income $654 $348 Dividends paid $54 $48 Addition to retained earnings $600 $300 Shares outstanding 100 100 Price $25.00 $22.50 WACC 10.00% The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash. What is Rosnan's 2020 net operating working capital (NOWC)? Round your answer to the nearest dollar. $ What is Rosnan's 2020 net working capital (NWC)? Round your answer to the nearest dollar. $