Using Accounting Information Larry M Walther; Christopher J Skousen Download free books at Using Accounting Information © 2009 Larry M Walther, under nonexclusive license to Christopher J Skousen & Ventus Publishing ApS All material in this publication is copyrighted, and the exclusive property of Larry M Walther or his licensors (all rights reserved) ISBN 978-87-7681-490-8 Download free eBooks at bookboon.com Contents Using Accounting Information Contents Part Financial Reporting and Concepts 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Special Reporting Situations Corrections of Errors Discontinued Operations Extraordinary Items Changes in Accounting Methods Other Comprehensive Income Recap EBIT and EBITDA Return on Assets 8 11 13 13 13 15 15 16 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Earnings per Share, Price Earnings Ratios, Book Value per Share, and Dividend Rates Basic EPS Diluted EPS Subdividing EPS Amounts Price Earnings Ratio Book Value per Share Calculating Book Value per Share Dividend Rates and Payout Ratios Return on Equity 3.1 Objectives of Financial Reporting Objectives 24 24 360° thinking 360° thinking 17 18 18 19 20 20 21 23 360° thinking Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities © Deloitte & Touche LLP and affiliated entities Discover the truth at www.deloitte.ca/careers Click on the ad to read more Download free eBooks at bookboon.com © Deloitte & Touche LLP and affiliated entities D Contents Using Accounting Information 4.1 4.2 4.3 Qualitative Characteristics of Accounting Understandability Threshold Issues Other Concepts 25 26 26 26 5.1 5.2 5.3 5.4 5.5 5.6 5.7 The Development of GAAP The Audit Function The Development of GAAP The 1929 Stock Crash and Great Depression The Securities and Exchange Commission The FASB and its Predecessors A More Recent Crisis of Reporting Confidence Sarbanes-Oxley 28 28 29 29 29 30 31 32 6.1 6.2 6.3 6.4 6.5 6.6 Key Assumptions Entity Assumption Going-Concern Assumption Periodicity Assumption Monetary Unit Assumption Stable Currency Assumption What you Think? 33 34 34 35 35 35 35 7.1 7.2 7.3 Global Accounting Issues Issues in International Trade Global Subsidiaries Global Trading Transactions 36 37 37 38 Increase your impact with MSM Executive Education For almost 60 years Maastricht School of Management has been enhancing the management capacity of professionals and organizations around the world through state-of-the-art management education Our broad range of Open Enrollment Executive Programs offers you a unique interactive, stimulating and multicultural learning experience Be prepared for tomorrow’s management challenges and apply today For more information, visit www.msm.nl or contact us at +31 43 38 70 808 or via admissions@msm.nl For more information, visit www.msm.nl or contact us at +31 43 38 70 808 the globally networked management school or via admissions@msm.nl Executive Education-170x115-B2.indd 18-08-11 15:13 Download free eBooks at bookboon.com Click on the ad to read more Contents Using Accounting Information Part Financial Analysis and the Statement of Cash Flows 41 8.1 8.2 8.3 8.4 8.5 8.6 Financial Statement Analysis Comprehensive Illustration Balance Sheet Income Statement Statement of Retained Earnings Ratios for Emerson Corporation as of December 31, 20x5 Trend Analysis 42 44 45 45 46 46 47 9.1 9.2 Cash Flows and the Cash Flow Statement The Statement of Cash Flows Cash and Cash Equivalents 48 48 48 10 10.1 10.2 Operating, Investing and Financing Activities Investing Activities Financing Activities 49 49 49 11 Noncash Investing and Financing Activities 50 12 12.1 12.2 12.3 Direct Approach to the statement of Cash Flows Methods to Prepare a Statement of Cash Flows Operating Activities Investing Activities 51 51 52 55 GOT-THE-ENERGY-TO-LEAD.COM We believe that energy suppliers should be renewable, too We are therefore looking for enthusiastic new colleagues with plenty of ideas who want to join RWE in changing the world Visit us online to find out what we are offering and how we are working together to ensure the energy of the future Download free eBooks at bookboon.com Click on the ad to read more Contents Using Accounting Information 12.4 12.5 12.6 12.7 Financing Activities Cash Flow Recap Noncash Investing/Financing Activities Reconciliation of Income to Operating Cash Flows 56 57 57 58 13 Indirect Approach to Presenting Operating Activities 60 14 Using a Worksheet to Prepare a Statement of Cash Flow 61 With us you can shape the future Every single day For more information go to: www.eon-career.com Your energy shapes the future Download free eBooks at bookboon.com Click on the ad to read more Financial Reporting and Concepts Using Accounting Information Financial Reporting and Concepts Part Your goals for this “accounting, reporting, and analysis” chapter are to learn about: x Special reporting situations (errors, discontinued operations, extraordinary items, etc.) x Earnings per share, price earnings ratios, book value per share, and dividend rates x The objectives of financial reporting x The qualitative characteristics of useful accounting information x The development of generally accepted accounting principles x Key assumptions of financial accounting and reporting x The growing role and importance of global accounting issues Download free eBooks at bookboon.com Financial Reporting and Concepts Using Accounting Information Special Reporting Situations In earlier book chapters, it was noted that the accounting profession uses an “all inclusive” approach to measuring income Virtually all transactions, other than shareholder related transactions like issuing stock and paying dividends, are eventually channeled through the income statement However, there are certain situations where the accounting rules have evolved in sophistication to provide special disclosures The reason for the added disclosure is to make it easier for users of financial statements to sort out the effects that are related to ongoing operations versus those that are somehow unique Specifically, the following discussion will highlight the correct handling of (1) error corrections, (2) discontinued operations, (3) extraordinary items, (4) changes in accounting methods, and (5) other comprehensive income items 1.1 Corrections of Errors Errors consist of mathematical mistakes, incorrect reporting, omissions, oversights, and other things that were simply handled wrong in a previous accounting period Once an error is discovered, it must be corrected The temptation is to simply force the books into balance by making a compensating error in the current period For example, assume that a company failed to depreciate an asset in 20X4, and this fact is discovered in 20X5 Why not just catch up by “double depreciating” the asset in 20X5, and then everything will be fine, right? Wrong! While it is true that accumulated depreciation in the balance sheet would be back on track at the end of 20X5, income for 20X4 and 20X5 would now both be wrong It is not technically correct to handle errors this way; instead, generally accepted accounting principles dictate that error corrections (if material) must be handled by “prior period adjustment.” This means that the financial statements of prior periods must be subjected to a restatement to make them correct in essence the financial statement of prior periods are redone to reflect the correct amounts Correcting financial statements of prior periods entails reissuing financial statements with the necessary corrections However, what journal entry is needed, given that revenue and expense accounts from earlier years have already been closed? Suppose that, in 20X5, a journal entry is needed to record the depreciation for 20X4 that was previously omitted in error: XX-XX-XX Retained Earnings 50,000 Accumulated Depreciation * 50,000 To record correction of error for previously omitted 20X4 depreciation expense This entry reveals a debit to Retained Earnings (reducing the beginning of year balance) for the depreciation expense that should have been recorded as an expense and closed to retained earnings in the prior year The credit to Accumulated Depreciation provides a catch up adjustment to where the account would have been, had the deprecation been correctly recorded in 20X4 Download free eBooks at bookboon.com Financial Reporting and Concepts Using Accounting Information Importantly, if comparative financial statements (i.e., financial statements, side by side, for two or more years as illustrated in the next chapter) are presented for 20X4 and 20X5, depreciation would be reported at the correct amounts in each years’ statements (along with a note indicating that the presentation of prior years’ data have been revised for an error correction) If an error related to prior periods for which comparative data are not presented, then the statement of retained earnings would be amended as follows: GOOF UP CORPORATION Statement of Retained Earnings For the Year Ending December 31, 20X5 Retained earnings - January 1, 20X5 - as previously reported Less Le ss:: Effect Effe Ef fect ct of o f correction corr co rrec ectition on of o f depreciation depr de prec ecia iatition on error eerr rror or from ffro rom m 20X4 20 X4 Less: * beginning retained earnings Corrected $500,000 (50,000) (50, ((5 0,00 ,0000) $450,000 125,000 Plus: Net income $575,000 (25,000) Less: Dividends $550,000 Retained earnings - December 31, 20X5 Shareholders generally take a dim view of prior period adjustments as they tend to undermine confidence in management and financial information But, GAAP takes the position that accountants must own up to their mistakes and reissue corrected financial data As a practical matter, some accountants give way to the temptation to find creative ways to sweep errors under the rug But, be wary of falling into this trap, as many a business person has found themselves in big trouble for trying to hide erroneous accounting data! 1.2 Discontinued Operations As you find time to read the business press, you will encounter many interesting articles about highprofile business decisions Particularly popular with the press is coverage of a major corporate action to exit a complete business unit Such disposals occur when a corporate conglomerate (i.e., a company with many diverse business units) decides to exit a unit of operation by sale to some other company, or by outright abandonment For example, a computer maker may decide to sell its personal computer manufacturing unit to a more efficient competitor, and instead focus on its mainframe and service business Or, a chemical company may simply decide to close a unit that has been producing a specialty product that has become an environmental and liability nightmare Whatever the scenario, if an entity is disposing of a complete business component, it will invoke the unique reporting rules related to “discontinued operations.” To trigger these rules requires that the disposed business component have operations that are clearly distinguishable operationally and for reporting purposes This would typically relate to a separate business segment, unit, subsidiary, or group of assets Below is an illustrative income statement for Bail Out Corporation Bail Out distributes farming implements and sporting goods During 20X7, Bail Out sold its sporting equipment business and Download free eBooks at bookboon.com Financial Reporting and Concepts Using Accounting Information began to focus only on farm implements In examining this illustration, be aware that revenues and expenses only relate to the continuing farming equipment All amounts relating to operations of the sporting equipment business, along with the loss on the sale of assets used in that business, are removed from the upper portion of the income statement, and placed in a separate category below income from continuing operations BAIL OUT CORPORATION Income Statement For the Year Ending December 31, 20X7 Sales Cost of goods sold Gross profit Operating expenses Salaries * Rent Other operating expenses Income from continuing operations before income taxes Income taxes Income from continuing operations Discontinued operations Loss Lo ss from fro f rom m operation oper op erat atio ionn of sports spo s port rtss equipment equi eq uipm pmen entt unit, unitit, including un incl in clud udin ingg loss lo ss on o n disposal disp di spos osal al Income Inco In come me tax t ax benefit ben b enef efitit from fro f rom m loss lo ss on o n disposal disp di spos osal al of o f business busi bu sine ness ss unit uni u nitt Loss on discontinued operations Net income $ 5,500,000 3,300,000 $ 2,200,000 $ 635,000 135,000 300,000 1,070,000 $ 1,130,000 400,000 $ 730,000 $ 600,000 600 600,0 ,000 00 130,000 130 130,,000 000 470,000 , $ 260,000 www.job.oticon.dk 10 Download free eBooks at bookboon.com Click on the ad to read more Financial Analysis and the Statement of Cash Flows Using Accounting Information 8.1 Comprehensive Illustration At this point, it may be helpful to consider these ratios as they relate to a comprehensive illustration Following are financial statements for Emerson Corporation Study them carefully Then, examine the ratio calculations for Emerson Corporation that can be found immediately following the financial statements 360° thinking 360° thinking 360° thinking Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities 44 © Deloitte & Touche LLP and affiliated entities Discover the truth at www.deloitte.ca/careers Click on the ad to read more Download free eBooks at bookboon.com © Deloitte & Touche LLP and affiliated entities D Financial Analysis and the Statement of Cash Flows Using Accounting Information 8.2 Balance Sheet EMERSON CORPORATION Comparative Balance Sheet December 31, 20X5 and 20X4 ASSETS Current assets Cash Accounts receivable Inventory Total current assets Property, plant & equipment Land Building Equipment Less: Accumulated Depreciation Total property, plant & equipment Total assets 20X5 20X4 $ 700,000 850,000 180,000 $ 1,730,000 $ 170,000 600,000 220,000 $ 990,000 $ 800,000 1,000,000 1,050,000 $ 2,850,000 (480,000) $ 2,370,000 $ 4,100,000 $ 1,400,000 700,000 900,000 $ 3,000,000 (360,000) $ 2,640,000 $ 3,630,000 $ 270,000 20,000 $ 290,000 $ 200,000 50,000 $ 250,000 900,000 $ 1,190,000 1,800,000 $ 2,050,000 $ $ LIABILITIES Current liabilities Accounts payable Wages payable Total current liabilities Long-term liabilities Long-term loan payable Total liabilities STOCKHOLDERS’ EQUITY 300,000 910,000 370,000 1,330,000 $ 2,910,000 $ 4,100,000 Preferred stock Common stock ($1 par) Paid-in capital in excess of par Retained earnings Total stockholders’ equity Total liabilities and equity 900,000 300,000 380,000 $ 1,580,000 $ 3,630,000 8.3 Income Statement EMERSON CORPORATION Income Statement For the Year Ending December 31, 20X5 Revenues Cost of goods sold Gross profit Operating expenses Wages Interest Depreciation Other operating expenses Gain on sale of land Income before income taxes Income taxes Net income $ 3,250,000 1,160,000 $ 2,090,000 $ 450,000 100,000 120,000 270,000 (940,000) 150,000 $ 1,300,000 300,000 $ 1,000,000 45 Download free eBooks at bookboon.com Financial Analysis and the Statement of Cash Flows Using Accounting Information 8.4 Statement of Retained Earnings EMERSON CORPORATION Statement of Retained Earnings For the Year Ending December 31, 20X5 * Beginning retained earnings, Jan Net income Less: Dividends on common Ending retained earnings, Dec 31 $ 380,000 1,000,000 $ 1,380,000 50,000 $ 1,330,000 8.5 Ratios for Emerson Corporation as of December 31, 20x5 Additional facts: No dividends were due or paid on the $300,000 of preferred stock which was issued in exchange for a building in late 20X5 Average common equity is assumed to be $2,095,000 ((($2,910,000 - $300,000) + $1,580,000)/2) Assume most other balance sheet items change uniformly throughout the year (e.g., average receivables = ($600,000 + $850,000)/2 = $725,000, etc.) The year end market value of the common stock was $10 per share, and the cash dividend was paid on shares outstanding at the end of the year ($50,000/910,000 shares = $0.055 per share) Current Ratio Current Assets/ Current Liabilities $1,730,000/$290,000 = 5.97 Quick Ratio (Cash + Short-term Investments + Accts Receivable)/ Current Liabilities $1,550,000/$290,000 = 5.34 Debt to Total Assets Ratio Total Debt/ Total Assets $1,190,000/$4,100,000 = 0.29 Debt to Total Equity Ratio Total Debt/ Total Equity $1,190,000/$2,910,000 = 0.41 Times Interest Earned Ratio Income Before Income Taxes and Interest/ Interest Charges $1,400,000/$100,000 = 14 Accounts Receivable Turnover Ratio Net Credit Sales/ Average Net Accounts Receivable $3,250,000/$725,000 = 4.48 Inventory Turnover Ratio Cost of Goods Sold/ Average Inventory $1,160,000/$200,000 = 5.8 Net Profit on Sales Ratio Net Income/ Net Sales $1,000,000/$3,250,000 = 31% Gross Profit Margin Ratio Gross Profit/ Net Sales $2,090,000/$3,250,000 = 64% Return on Assets Ratio (Net Income + Interest Expense)/ Average Assets $1,100,000/$3,865,000 = 28% Return on Equity Ratio (Net Income - Preferred Dividends)/ Average Common Equity $1,000,000/$2,095,000 = 48% EPS Income Available to Common/ Weighted-Average Number of Common Shares $1,000,000/905,000 = $1.11 P/E Market Price Per Share/ Earnings Per Share $10/$1.11 = Dividend Rate/Yield Annual Cash Dividend/ Market Price Per Share $0.055/$10 = 0.55 % Dividend Payout Ratio Annual Cash Dividend/ Earnings Per Share $0.055/$1.11 = 5.0% Book Value “Common” Equity/ Common Shares Outstanding $2,610,000/910,000 = $2.87 * 46 Download free eBooks at bookboon.com Financial Analysis and the Statement of Cash Flows Using Accounting Information In examining the ratios of Emerson, it would appear that the company is doing fairly well Its liquidity suggests no problem in meeting obligations, the debt is at a manageable level, receivables and inventory appear to be turning reasonably well, and profits are good 8.6 Trend Analysis Financial statement data are often reproduced in percentage terms For example, Emerson’s cash is 17% of total assets ($700,000/$4,100,000) Such percentage data can be monitored closely, year after year This provides sharp investors and managers with a keen sense of subtle shifts that can foretell changes in the underlying business environment Increase your impact with MSM Executive Education For almost 60 years Maastricht School of Management has been enhancing the management capacity of professionals and organizations around the world through state-of-the-art management education Our broad range of Open Enrollment Executive Programs offers you a unique interactive, stimulating and multicultural learning experience Be prepared for tomorrow’s management challenges and apply today For more information, visit www.msm.nl or contact us at +31 43 38 70 808 or via admissions@msm.nl For more information, visit www.msm.nl or contact us at +31 43 38 70 808 the globally networked management school or via admissions@msm.nl Executive Education-170x115-B2.indd 18-08-11 15:13 47 Download free eBooks at bookboon.com Click on the ad to read more Financial Analysis and the Statement of Cash Flows Using Accounting Information Cash Flows and the Cash Flow Statement Accounting is based upon accrual concepts that report revenues as earned and expenses as incurred, rather than when received and paid Accrual information is perhaps the best indicator of business success or failure However, one cannot ignore the importance of cash flows For example, a rapidly growing successful business can be profitable and still experience cash flow difficulties in trying to keep up with the need for expanded facilities and inventory On the other hand, a business may appear profitable on an accrual basis, but may be experiencing delays in collecting receivables, and this can impose severe liquidity constraints Or, a business may be paying generous dividends, but only because cash is being produced from the disposal of core assets Sophisticated analysis of the balance sheet and income statement will often reveal such issues 9.1 The Statement of Cash Flows Rather than depending upon sophisticated financial statement users to their own detailed cash flow analysis, the accounting profession has seen fit to require another financial statement that clearly highlights the cash flows of a business entity This required financial statement is appropriately named the Statement of Cash Flows The Statement of Cash Flows can be seen as an outgrowth of the FASB’s conceptual framework In the previous chapter, it was pointed out that the FASB cited one objective of financial reporting as follows: Information should be helpful in assessing the amounts, timing, and uncertainty of an organization’s cash inflows and outflows The applicable rules require that the statement of cash flows provide three broad categories that reveal information about operating activities, investing activities, and financing activities In addition, businesses are required to reveal significant noncash investing/financing transactions 9.2 Cash and Cash Equivalents In preparing the statement of cash flows, companies broadly define “cash” to consist of cash and items that are equivalent to cash As a general rule, cash equivalents are short-term, highly liquid investments that mature in 90 days or less 48 Download free eBooks at bookboon.com Financial Analysis and the Statement of Cash Flows Using Accounting Information 10 Operating, Investing, and Financing Activities Cash inflows from operating activities consist of receipts from customers for providing goods and services, and cash received from interest and dividend income (as well as the proceeds received upon the sale of “trading securities”) Cash outflows consist of payments for inventory, employee salaries and wages, taxes, interest, and other normal business expenses (and the cost of “trading securities” purchased) To generalize, cash from operating activities is generally linked to those transactions and events that enter into the determination of income However, another way to view “operating” cash flows is to include anything that is not an “investing” or “financing” cash flow as described below 10.1 Investing Activities Cash inflows from investing activities result from items such as the sale of stock and bond investments (other than “trading”), disposal of long-term productive assets, and receipt of principal repayments on loans made to others Cash outflows from investing activities include payments made to acquire long-term assets or long-term investments (other than “trading”) in other firms, loans made by the entity to others, and similar items 10.2 Financing Activities Cash inflows from financing activities relate to the proceeds received when a company issues its own stock or bonds, borrowings under mortgage notes and loans, and so forth Cash outflows for 49 Download free eBooks at bookboon.com Financial Analysis and the Statement of Cash Flows Using Accounting Information 11 Noncash Investing and Financing Activities A select set of important investing and financing activities occur without generating or consuming any cash For example, a company may exchange common stock for land, or acquire a building in exchange for a note payable While these transactions not entail a direct inflow or outflow of cash, they pertain to significant investing and/or financing events When the FASB designed the statement of cash flows, they decided to require a separate section reporting these noncash items Thus, the statement of cash flows is actually enhanced beyond its “title;” revealing the totality of investing and financing activities, whether or not cash is actually involved GOT-THE-ENERGY-TO-LEAD.COM We believe that energy suppliers should be renewable, too We are therefore looking for enthusiastic new colleagues with plenty of ideas who want to join RWE in changing the world Visit us online to find out what we are offering and how we are working together to ensure the energy of the future 50 Download free eBooks at bookboon.com Click on the ad to read more Financial Analysis and the Statement of Cash Flows Using Accounting Information 12 Direct Approach to the Statement of Cash Flows Earlier in this chapter, you studied the income statement, statement of retained earnings, and balance sheet for Emerson Corporation Before proceeding, spend just a few moments reviewing those financial statements Then, examine the following statement of cash flows for Emerson Corporation Everything within this cash flow statement is derived from the data and additional comments presented earlier for Emerson At first, some of the cash flow statement will seem a bit mysterious, but a “line by line” explanation will follow The tan bar at the left is not part of the statement; it is to facilitate the “line by line” discussion” (e.g line F4 will refer to the 4th line in the financing activities section) EMERSON CORPORATION Statement of Cash Flows (Direct Approach) For the Year Ending December 31, 20X5 O1 O2 O3 O4 O5 O6 O7 O8 O9 I1 I2 I3 I4 F1 F2 F3 F4 F5 Cash flows from operating activities: Cash received from customers Less cash paid for: Merchandise inventory Wages Interest Other operating expenses Income taxes Net cash provided by operating activities $ 3,000,000 $ 1,050,000 480,000 100,000 270,000 300,000 $ (2,200,000) 800,000 Cash flows from investing activities: *Sale of land Purchase of equipment Net cash provided by investing activities $ 750,000 (150,000) 600,000 Cash flows from financing activities: Proceeds from issuing stock Dividends on common Repayment of long-term loans Net cash used in financing activities C1 Net increase in cash C2 Cash balance at January 1, 20X5 C3 Cash balance at December 31, 20X5 N1 Noncash investing/financing activities: N2 Issued preferred stock for building $ 80,000 (50,000) (900,000) (870,000) $ 530,000 170,000 $ 700,000 $ 300,000 12.1 Methods to Prepare a Statement of Cash Flows There are several ways to go about preparing a statement of cash flows You may hear about a “T” account approach or a “worksheet” approach for organizing data to present the statement But, trying to learn the statement of cash flows by focusing on the specific method for its preparation can 51 Download free eBooks at bookboon.com Financial Analysis and the Statement of Cash Flows Using Accounting Information DFWXDOO\REVFXUH\RXUXQGHUVWDQGLQJRIWKHVWDWHPHQW/HW¶VILUVWIRFXVRQRXU³OLQHE\OLQH´ XQGHUVWDQGLQJRIKRZWKHFRQWHQWIRU(PHUVRQ VVWDWHPHQWLVGHULYHG$V\RXSURFHHGWU\WRIRFXV RQXQGHUVWDQGLQJQRWPHPRUL]DWLRQ7KHVWDWHPHQWRIFDVKIORZVGUDZVRQ\RXUFRPSOHWH XQGHUVWDQGLQJRIDFFRXQWLQJDQGLWLVTXLWHFRPPRQIRUVWXGHQWVWRLQLWLDOO\VWUXJJOHZLWKWKH VWDWHPHQWGRQRWGHVSDLUDQGGRQRWJLYHXS  12.2 Operating Activities /,1(2&$6+)/2:6)52023(5$7,1*$&7,9,7,(67KLVOLQHPHUHO\LGHQWLILHVWKH VHFWLRQ  O1 Cash flows from operating activities:     /,1(2&$6+5(&(,9(')520&86720(56(PHUVRQ¶VFXVWRPHUVSDLGLQ FDVK  O2 Cash received from customers $ 3,000,000     +RZGRZHNQRZWKLV"(PHUVRQ¶VLQIRUPDWLRQV\VWHPFRXOGEHVXIILFLHQWO\UREXVWWKDWD³GDWDEDVH TXHU\´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ess cash paid for:  /,1(2&$6+3$,')25,19(1725