Reading & Understanding Basic Financial Statements
Agenda
Purpose of financial statements
The Balance Sheet
The Income Statement
Statement of Retained Earnings
Statement of Cash Flows
Standards for comparison
Tools of analysis
Primary Financial Statements
- Balance Sheet
- Income Statement
- Statement of Retained Earnings
- Statement of Cash Flows
Primary financial statements answer basic questions including
What is the company’s current financial status?
What was the company’s operating results for the period?
How did the company obtain and use cash during the period?
The Balance Sheet
Summary of the financial position of a company at a particular date
Assets: Cash, accounts receivable, inventory, land, buildings, equipment and intangible items.
Liabilities: Accounts payable, notes payable and mortgages payable.
Owners’ Equity: Net assets after all obligations have been satisfied.
The Income Statement
Shows the results of a company’s operations over a period of time.What goods were sold or services performed that provided revenue for the company?
What costs were incurred in normal operations to generate these revenues?
What are the earnings or company profit?
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