# Gross Sales (Gross Revenue): the total amount of money received from customers

Size: px
Start display at page:

Transcription

1 Chapter 17 Financial Statements and Ratios 17.1: The Income Statement : Learn the terms used with income statements Income Statement: a financial statement used to summarize all income and expenses for a company for a given time period (i.e. a month, a quarter, a year) Gross Sales (Gross Revenue): the total amount of money received from customers Returns: returns made by customers (not usually counted by large companies) Net Sales: value of the goods/services bought and retained by customers Net Sales = Gross Sales Returns Cost of Goods Sold: amount paid by the company for the items sold to customers Gross Profits: money left over after the company pays for the goods sold to customers Gross Profit = Net Sales Cost of Goods Sold Overhead (Operating Costs): the firm's cost to run the business Net Income Before Taxes: amount earned before a company pays taxes Net Income Before Taxes = Gross Profit Operating Expenses Net Income: the amount a company has remaining after paying taxes Net Income = Net Income Before Taxes Income Taxes : Using General Motor's income statement as an example Consider the following income statement, with two items missing: Cost of Goods Sold and Income Taxes. Note that the numbers are rounded off to Millions of Dollars. Income Statement for General Motors YE 12/31/2002 Gross sales \$186, Returns \$0.00 Net sales \$186, Cost of goods sold Gross profit \$33, Overhead \$31, Net before taxes \$2, Income taxes Net Income \$1,736.00

3 17.2: Analyzing the Income Statement In the previous section we created an income statement that helps break down income and expenses for a given period for a company. Still, a company might ask a question such as What happened to each part of the sales dollar? To answer this question, we will need to list the important parts of the income statement as a percent of net sales. This procedure is called vertical analysis : Compare income statements using vertical analysis Recall the PBR formula, and its reworking to yield the rate: Rate = Part / Base We will use the same formula for our vertical analysis in the following way: Rate = (Particular Item) / (Net Sales) That is, we will always have net sales in the denominator. Looking back at our example for GM, we see that % Cost of Goods Sold = \$153,344 / \$186,763 = 82.1% We have now used vertical analysis to conclude that GM spent over 80% of its revenue on purchasing components for the goods that it sells. Example: Below is the income statement for GM for the year following the one completed in Section 1. Perform vertical analysis on each area to obtain a perspective about GM's financial progress. Income Statement for General Motors YE 12/31/2003 Gross sales \$196, Returns \$0.00 Net sales \$196, Cost of goods sold \$168, Gross profit \$28, Overhead \$23, Net before taxes \$4, Income taxes \$ Net Income \$4, Notice that even though Cost of Goods Sold increased from 2002 to 2003, GM was able to increase profit by reducing overhead : Calculate percent of net sales The formula that was given to check your figures for the income statement can be used the same for percents. Check this for the 2002 data from GM.

4 17.2.3: Compare an income statement with published charts Another way to analyze an income statement is to compare its percent of net sales to a chart that details average percents for the industry. If we look at the table on page 664, and pretend that Burton's Shoes is instead Burton's Steaks (a restaurant), how is Burton's Steaks faring compared to the industry? : Prepare a horizontal analysis Finally, we can compare one income statement to another by using horizontal analysis. In horizontal analysis we study the percent change from one period to another, rather than comparing the percent of net sales from one period to the next. For example, with our data from '02 and '03 for GM, we could see that the percent change in revenue is equal to 5.1%--that is, \$196,354 - \$186, x 100 \$186,763 To find percent changes we use the following formula: [(New Old) / Old] x 100. Example: Finish a horizontal analysis for GM from 02 to 03.

5 17.3: The Balance Sheet : Identify the terms used with balance sheets Whereas an income sheet gives an account of the state of a firm over a period of time, the balance sheet gives a snapshot at one moment in time for a company. Like the income statement, there is a set of terminology that needs to be learned. Assets Current assets: cash or items that can be converted to cash withing a short period of time (i.e. less than a year) Cash: cash in checking or savings accounts Marketable Securities: stocks, bonds, and other securities that can quickly be converted to cash Accounts Receivable: funds owed by customers Notes Receivable: notes (loans) owed to the company Inventory: cost of merchandise that the firm has for sale Fixed Assets: assets that are expected to be used for more than one year Land: book value of any land owned by the firm Buildings: book value of any building(s) owned by the firm Equipment: book value of any equipment, fixtures, furniture, and similar items owned by the firm Liabilities Current Liabilities: items that must be paid by the firm within a short period of time (usually less than one year) Accounts Payable: amounts that must be paid to other firms Short-term Notes Payable: short-term notes (loans) that must be paid by the firm Long-term Liabilities: items that will be paid, but after a year's time Mortgage's Payable: total due on all mortgages Long-term Notes Payable: total of all long term notes owed by the company The difference between the total of all assets and the total of all liabilities is called the owner's equity sometimes referred to as net worth. For a corporation, this would be called the stockholder's equity. From this we have the following formula Owners' Equity = Assets Liabilities : Prepare a balance sheet Let us prepare a balance sheet for the fictitious company, The Farmers Market. The Farmers Market has \$8,000 currently listed as its cash reserve, \$11,000 as its notes receivable, \$15,000 in accounts receivable, and \$51,000 in inventory. The land they own is worth \$24,000, and they have buildings worth \$22,000 as well as store fixtures that are worth \$18,000. Liabilities include short-term notes payable worth \$8,000, accounts payable valued at \$26,000, mortgages that have a total of \$39,000, and long-term notes payable with a total of \$24,000. The owners' equity is currently \$52,000.

6 17.4: Analyzing the Balance Sheet & Financial Ratios : Comparing balance sheets with vertical analysis With the balance sheet, we express each item in terms of a percent of total assets when doing vertical analysis. When we make a comparative balance sheet, we perform vertical analysis on two different years and compare the percentages. Look at page 676, and notice the following: (1) percentages for assets and liabilities should always add up to 100% for each (give or take a small amount for rounding); (2) we can use various entries to conclude results for instance the drop from 6.1% to 1.8% for stockholder's equity. Example: Look at problem 1 on : Prepare a horizontal analysis Just as we did in section 2, we can perform a horizontal analysis on two balance sheets. All we need is to use our formula % Change = [(New Old)/Old] x 100. Looking at Example 2 on page 677, how does the value and percent change differ when we replace 2001's accounts receivable to \$16,321? : Find the Current Ratio The current ratio also known as the banker's ratio is the ratio obtained by dividing current assets by current liabilities: Current Ratio = (Current Assets)/(Current Liabilities). Now, there are three general possibilities for the current ratio (CR): < 1, = 1, or > 1. Let's examine what each case represents. CR < 1: If the CR is less than one, the firm currently has more liabilities than it does assets. One way of looking at this is that even if the firm liquidated everything it owned and paired the sales with its cash/investment assets, it could not cover its debts. CR = 1: If the CR is exactly one then the company has as much worth as it owes out. This dangerous area can become good or bad quickly. CR > 1: If the CR is greater than one, then the firm has more assets than it does liabilities. This is the ideal place for a firm to be as it implies current financial stability as well as the ability to handle sudden decreases in income (increases in debt) to a certain point. Example: Find the Current Ratio for GM for 2001 and 2002 from the balance sheets given in example 1 on page 676. One disadvantage of the Current Ratio is that the figure includes inventory that may not be able to be sold off at a reasonable price. For this reason, many accountants prefer the Acid-Test Ratio.

7 17.4.4: Find the Acid-Test Ratio The Acid-Test Ratio relies on liquid assets: assets that are cash or can be converted to cash quickly (such as securities, accounts/notes receivable). The Acid-Test Ratio (ATR) is given by the formula Acid-Test Ratio = (Liquid Assets) / (Current Liabilities). Just as with the Current Ratio, we want the ATR to be greater than or equal to 1. If you find the ATR for GM for 2002, you will see a result of 0.59, which is certainly less than : Find the ratio of net income after taxes to average owners' equity If we look in on a large company with a lot of capital invested, and also do the same for a small company with only a small capital investment, we should expect to see the large company having a higher net income. One way to check this is with the Ratio of Net Income After Taxes to Average Owners' Equity (RNI2AOE). To find this ratio, we first need to find what the average owners' equity was throughout the year. To do this, we use the formula: Average Owners' Equity (AOE) = [(OE at beginning of year) + (OE at end of year)] / 2. Notice that this is the same method for finding the average of 2 things like test scores, bowling scores, ages, etc. After we have the AOE, we have that RNI2AOE = (Net Income After Taxes) / AOE. First, we remark that this is the first ratio that requires both the income statement and the balance sheet. Next, you might ask why we look at this ratio. The answer is not as immediate as the others so far, but if I tell you that the RNI2AOE is sometimes referred to as the Return on Equity, it should be more apparent. The RNI2AOE is a ratio that indicates what your expected yield on an investment in the company should be. If the RNI2AOE is less than the current interest rate paid on savings and government bonds, the capital should be placed in the bank instead of being invested in the company. Example: What is the RNI2AOE for GM in 2002? & : Find the accounts receivable turnover & the average age of AR Another useful financial ratio is the AR Turnover. What this tells us is on average how many accounts receivable accounts are turned over (i.e. collected). First, we need to know what the average balance of the accounts receivable was for the year: Average AR = [(AR at beginning of year) + (AR at end of year)] / 2. Once we know this dollar amount, we only need to divide it in to Net Sales to find the AR Turnover: AR Turnover = (Net Sales) / (Avg. AR). This figure provides us with a snapshot of how many times per year the company is collecting what it is owed. If this number begins to grow, the company is getting better at collecting. If the number starts to diminish, the company could be headed for financial troubles. Looking back at GM's balance sheet for 2002, we see that their AR Turnover was This indicates they turned their AR over about 12 times in a year. This number points to the Average Age of AR how long monies owed remain uncollected on

8 average. To find the Avg. Age of AR, we use the following formula: Avg. Age of AR = 365 / (AR Turnover). For example, suppose GM's AR Turnover for 2005 was 17.6, what would their Avg. Age of AR be? : Find the Debt-to-Equity Ratio In general, companies must usually borrow money to make money. This practice is acceptable provided that they do not take on so much debt that they could no longer do business. One common metric that serves as an indicator for the health of a company is the Debt-to-Equity Ratio (D2E): D2E = [(Current Liabilities) + (Long term Liabilities)] / (Owners' Equity). For instance, GM's D2E in 2002 was is this number good or bad? The answer is: it depends. What is depends on primarily is the industry and how fast inventory can be converted to cash. To get a better sense of whether GM's 53.6 D2E is good or not, we look at other car manufacturers. In 2002, Ford's D2E was 49.7, Toyota's was 1.8, and DaimlerChrysler's was 4.4. Clearly GM is the worst of the 4 and this is another indicator that they were headed for the financial hardship that befell them at the start of the recession.

### Chapter Review Problems

Chapter Review Problems Unit 17.1 Income statements 1. When revenues exceed expenses, is the result (a) net income or (b) net loss? (a) net income 2. Do income statements reflect profits of a business

### * * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Chapter 15 Accounting & Financial Statements Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Bookkeeping vs. Accounting Bookkeeping Accounting The recording of business transactions.

### BACKGROUND KNOWLEDGE for Teachers and Students

Pathway: Business, Marketing, and Computer Education Lesson: BMM C6 4: Financial Statements and Reports Common Core State Standards for Mathematics: N.Q.2 Domain: Quantities Cluster: Reason quantitatively

### Financial Statements and Ratios: Notes

Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help

### Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

### PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

### Section 12.1 Financial Ratios Section 12.2 Break-Even Analysis

Section 12.1 Financial Ratios Section 12.2 Break-Even Analysis OBJECTIVES Explain what a financial ratio is Describe how income statements are used for financial analysis Compare operating ratios and return-on-sales

### Chapter. How Well Am I Doing? Financial Statement Analysis

Chapter 17 How Well Am I Doing? Financial Statement Analysis 17-2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain the need for and limitations of financial statement

### Report Description. Business Counts. Top 10 States (by Business Counts) Page 1 of 16

5-Year County-Level Financial Profile Industry Report Architectural Services (SIC Code: 8712) in Prince George County, Maryland Sales Range: \$500,000 - \$999,999 Date: 11/07/08 Report Description This 5-Year

### Income Measurement and Profitability Analysis

PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance

### Guide to Financial Ratios Analysis A Step by Step Guide to Balance Sheet and Profit and Loss Statement Analysis

Guide to Financial Ratios Analysis A Step by Step Guide to Balance Sheet and Profit and Loss Statement Analysis By BizMove Management Training Institute Other free books by BizMove that may interest you:

### Trading Profit and Loss Account

Trading Profit and Loss Account Trading Account The trading account shows the income from sales and the direct costs of making those sales. It includes the balance of stocks at the start and end of the

### Guide to Financial Statements Study Guide

Guide to Financial Statements Study Guide Overview (Topic 1) Three major financial statements: The Income Statement The Balance Sheet The Cash Flow Statement Objectives: Explain the underlying equation

### Preparing a Successful Financial Plan

Topic 9 Preparing a Successful Financial Plan LEARNING OUTCOMES By the end of this topic, you should be able to: 1. Describe the overview of accounting methods; 2. Prepare the three major financial statements

### FINANCIAL MANAGEMENT

100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II djohnston@becpas.com

### UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements

UNDERSTANDING WHERE YOU STAND A Simple Guide to Your Company s Financial Statements Contents INTRODUCTION One statement cannot diagnose your company s financial health. Put several statements together

### 6.3 PROFIT AND LOSS AND BALANCE SHEETS. Simple Financial Calculations. Analysing Performance - The Balance Sheet. Analysing Performance

63 COSTS AND COSTING 6 PROFIT AND LOSS AND BALANCE SHEETS Simple Financial Calculations Analysing Performance - The Balance Sheet Analysing Performance Analysing Financial Performance Profit And Loss Forecast

Understanding Financial Statements For Your Business Disclaimer The information provided is for informational purposes only, does not constitute legal advice or create an attorney-client relationship,

### Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability

A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability

### Essentials of Financial Statement Analysis

Essentials of Financial Statement Analysis An Introduction to Financial Statement Analysis Gregory Mostyn, CPA Worthy and James Publishing www.worthyjames.com Essentials of Financial Statement Analysis

### Financial Statement Ratio Analysis

Management Accounting 319 Financial Statement Ratio Analysis Financial statements as prepared by the accountant are documents containing much valuable information. Some of the information requires little

### Plan and Track Your Finances

Ratio Analysis CBDC, NB February, 2008 Presented by ACSBE Financial Analysis What is Financial Analysis? What Can Financial Ratios Tell? 7 Categories of Financial Ratios Significance of Using Ratios Industry

### Exercise 17-1 (15 minutes)

Exercise 17-1 (15 minutes) 1. 2002 2001 Sales... 100.0% 100.0 % Less cost of goods sold... 63.2 60.0 Gross margin... 36.8 40.0 Selling expenses... 18.0 17.5 Administrative expenses... 13.6 14.6 Total expenses...

### Topic 4 Working Capital Management. 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital. 4.

Topic 4 Working Capital Management 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital 3. Optimization i i of Working Capital 4. Applications 80 Learning objectives This

### Computing the Total Assets, Liabilities, and Owner s Equity

21-1 Assets are the total of your cash, the items that you have purchased, and any money that your customers owe you. Liabilities are the total amount of money that you owe to creditors. Owner s equity,

### Cash Flow Forecasting & Break-Even Analysis

Cash Flow Forecasting & Break-Even Analysis 1. Cash Flow Cash Flow Projections What is cash flow? Cash flow is an estimate of the timing of when the cash associated with sales will be received and when

### Financial Statements Tutorial

Financial Statement Review: Financial Statements Tutorial There are four major financial statements used to communicate information to external users (creditors, investors, suppliers, etc.) - 1. Balance

### EasyPC Training. Accounting Basics

EasyPC Training Accounting Basics Contents Accounting Basics... 3 The Accounting Equation... 3 Assets... 3 Liabilities... 3 Owner s Equity... 3 The Balance Sheet... 5 Double Entry Bookkeeping... 6 Ledger

### PERSONAL FINANCIAL STATEMENT

PERSONAL FINANCIAL STATEMENT As of, 20 BUSINESS PLAN GUIDELINES Name: Residence Phone: Residence Address: City, State, Zip Code: Social Security Number: PERSONAL ASSETS PERSONAL LIABILITIES Cash in Bank

### Chapter 1. Introduction to Accounting and Business

1 Chapter 1 Introduction to Accounting and Business Learning Objective 1 Describe the nature of a business, the role of accounting, and ethics in business. Nature of Business and Accounting A business

### SOLUTIONS. Learning Goal 30

S1 Learning Goal 30 Multiple Choice 1. d 2. d 3. b 4. a Earnings per share is also used directly for comparing profitability on a per-share basis. 5. d 6. c An airline would have a much greater investment

ABOUT FINANCIAL RATIO ANALYSIS Over the years, a great many financial analysis techniques have developed. They illustrate the relationship between values drawn from the balance sheet and income statement

### Performance Review. Sample Company

Performance Review Sample Company For the period ended 12/31/2017 Provided By Page 1 / 18 This report is designed to assist you in your business' development. Below you will find your overall ranking,

### Financial Statements. Chapter 19 Study Guide

Financial Statements Chapter 19 Study Guide Financial Statements Discuss the nature of a consolidated financial statement? Understand the relationship between the work sheet and the financial statements.

### Financial Statements

Financial Statements The financial information forms the basis of financial planning, analysis & decision making for an organization or an individual. Financial information is needed to predict, compare

### Return on Equity has three ratio components. The three ratios that make up Return on Equity are:

Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to

### CHAPTER 9: ACCOUNTING

CHAPTER 9: ACCOUNTING A. Business Vocabulary In Chapter 9, you'll encounter some terms that relate to accounting. Before you begin working with the chapter, browse through the pages and look for the bolded

### Gold Run Snowmobile. Adjusting Entries and Closing Entries For The Quarter Ended December 31. Final Project Evaluation. 5 th Edition.

Gold Run Snowmobile 5 th Edition Adjusting Entries and Closing Entries For The Quarter Ended December 31 and the Final Project Evaluation Page 1 ADJUSTING ENTRIES FOR THE QUARTER Using a copy of the December

### LIABILITIES. Liabilities are claims against your Assets. They are something that you have to repay to someone else.

Accounting 101 ASSETS An Asset is something that you own, that has value, and will generate a future benefit. Assets are good. Eg.) Cash, accounts receivable, GST receivable, inventory, equipment, land,

### SMALL BUSINESS DEVELOPMENT CENTER RM. 032

SMALL BUSINESS DEVELOPMENT CENTER RM. 032 FINANCING THROUGH COMMERCIAL BANKS Revised January, 2013 Adapted from: National Federation of Independent Business report Steps to Small Business Financing Jeffrey

### Performance Review for Electricity Now

Performance Review for Electricity Now For the period ending 03/31/2008 Provided By Mark Dashkewytch 780-963-5783 Report prepared for: Electricity Now Industry: 23821 - Electrical Contractors Revenue:

### Account Numbering. By separating each account by several numbers, many new accounts can be added between any two while maintaining the logical order.

Chart of Accounts The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first needs to define

### Financial. Management FOR A SMALL BUSINESS

Financial Management FOR A SMALL BUSINESS 1 Agenda Welcome, Pre-Test, Agenda, and Learning Objectives Benefits of Financial Management Budgeting Bookkeeping Financial Statements Business Financing Key

### Chapter Financial Forecasting

Chapter Financial Forecasting PPT 4-2 Chapter 4 - Outline What is Financial Forecasting? 3 Financial Statements for Forecasting Constructing Pro Forma Statements Basis for Sales Projections Steps in a

### CHAPTER 11 ANALYZING FINANCIAL STATEMENTS: A MANAGERIAL PERSPECTIVE

CHAPTER 11 ANALYZING FINANCIAL STATEMENTS: A MANAGERIAL PERSPECTIVE Bill Reston is the chief operating officer of Valley Home Loans, a residential mortgage lender located in Philadelphia, Pennsylvania.

### How To Calculate Financial Leverage Ratio

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK

### Understanding A Firm s Financial Statements

CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,

### 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

### Using Accounts to Interpret Performance

Using s to Interpret Performance ing information is used by stakeholders to judge the performance and efficiency of a business Different stakeholders will look for different things: STAKEHOLDER Shareholders

### The Basic Framework of Budgeting

Master Budgeting 1 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 1. The act of

### Construction Economics & Finance. Module 6. Lecture-1

Construction Economics & Finance Module 6 Lecture-1 Financial management: Financial management involves planning, allocation and control of financial resources of a company. Financial management is essential

### What is a business plan?

What is a business plan? A business plan is the presentation of an idea for a new business. When a person (or group) is planning to open a business, there is a great deal of research that must be done

### STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS

C H A P T E R 1 0 STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS I N T R O D U C T I O N Historically, profit-oriented businesses have used the accrual basis of accounting in which the income statement,

### Financial Statements LESSON 15. What are Financial Statements?

Financial Statements LESSON 15 Main Idea Business owners must have accurate and timely information about the fi nancial status of their business to make the best decisions. Most of this fi nancial information

Basic Business Plan Outline A business plan needs to be a well thought out, honest, appraisal of the business and opportunity. This outline is meant to be used for your road map. It should be a living

### CENTRE FOR CONTINUING EDUCATION BBA (AVIATION OPERATION)

CENTRE FOR CONTINUING EDUCATION BBA (AVIATION OPERATION) BATCH: SEMESTER: NAME: ROLL NO: ASSIGNMENT 1 & 2 FOR BUSINESS ACCOUNTING BBCF 131 UNIVERSITY OF PETROLEUM & ENERGY STUDIES Assignment-1 Note: All

Understanding Financial Statements: What do they say about your business? This workbook is not designed to be your only guide to understanding financial statements. A much wider range of resources is available

### Financial Statements for Manufacturing Businesses

Management Accounting 31 Financial Statements for Manufacturing Businesses Importance of Financial Statements Accounting plays a critical role in decision-making. Accounting provides the financial framework

### Assets, Liabilities, and Net Worth

Assets, Liabilities, and Net Worth C H A P T E R 3 OVERVIEW Assets, liabilities, and net worth are part of the language of finance. As such, it is important to understand both their composition and how

### Brain J. Dunn, CEO Richfield, Minnesota U.S Latest fiscal year: 2010 Best Buy is an American retailer that sells a wide variety of electronic

Current Shareholders in Best Buy should hold their stock until price increases, and new investors should not invest if looking for fast money, Best Buy s stock may not more until more economic growth occurs.

### How to Prepare a Cash Flow Forecast

The Orangeville & Area Small Business Enterprise Centre (SBEC) 87 Broadway, Orangeville ON L9W 1K1 519-941-0440 Ext. 2286 or 2291 sbec@orangeville.ca www.orangevillebusiness.ca Supported by its Partners:

### Discussion Board Articles Ratio Analysis

Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash

### 6. Financial Planning. Break-even. Operating and Financial Leverage.

6. Financial Planning. Break-even. Operating and Financial Leverage. Financial planning primarily involves anticipating the impact of operating, investment and financial decisions on the firm s future

### Financial Plan. A) Estimated One-Time Financial Requirements. Part One

Financial Plan The Financial Plan is perhaps one of the most important components of your Business Plan (see Business Plan Handout). Not only is it essential if you are seeking external financing it is

### Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements In the United States, businesses generally present financial information in the form of financial statements

### ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT 6E

CHAPTER 11 Creating a Successful Financial Plan The Importance of a Financial Plan Financial planning is essential to running a successful business and is not that difficult! Common mistake among business

### Preparing Financial Statements

Preparing Financial Statements Understanding financial statements is essential to the success of a small business. They can be used as a roadmap to steer you in the right direction and help you avoid costly

### 12. FINANCIAL MANAGEMENT

12. FINANCIAL MANAGEMENT Financing the business The capital of a business consists of those funds used to start and run the business. Capital may be of two types: fixed and working. Fixed capital refers

### Developing Financial Statements

New York StartUP! Business Plan Competition Developing Financial Statements Presented by Paisley Demby, CEO PBN Consulting, LLC www.pbnconsulting.com 1 Invitation to Tweet #2015NYStartUp PaisleyDemby Contents

### Chapter 002 Financial Statements, Taxes and Cash Flow

Multiple Choice Questions 1. The financial statement summarizing the value of a firm's equity on a particular date is the: a. income statement. B. balance sheet. c. statement of cash flows. d. cash flow

### Revisited. Working Capital Lines of Credit,

CR Credit Risk Working Capital Lines of Credit, Revisited Avoid the risks of oversized lines of credit by understanding the factors that may create a need for bank financing. 34 October 2012 The RMA Journal

### How To Balance Sheet

Page 1 of 6 Balance Sheet Accounts The Chart of Accounts is normally arranged or grouped by the Major Types of Accounts. The Balance Sheet Accounts (Assets, Liabilities, & Equity) are presented first,

### BizScore Contractor Example

BizScore Contractor Example For the period ending 12/31/2009 Provided By www.bizscorevaluation.com 919-846-4747 bizscore@gmail.com Page 1 / 11 This report is designed to assist you in your business' development.

### BUSINESS BUILDER 2 HOW TO PREPARE AND ANALYZE A BALANCE SHEET

BUSINESS BUILDER 2 HOW TO PREPARE AND ANALYZE A BALANCE SHEET zions business resource center 2 how to prepare and analyze a balance sheet Examine the concepts of assets, liabilities, and net worth in a

### Interpret accounting information for sole proprietors Resource Title: Qwerty Computers - Home Revision Sim

How to use this Sim Welcome! Your username is: NCEA Accounting 1.5 - Achievement Standard 90980 Interpret accounting information for sole proprietors Resource Title: Qwerty Computers - Home Revision Sim

### Accounting Practice Questions

Accounting Practice Questions 1) The fundamental accounting equation states that: a) assets = liabilities + owner s equity b) assets = liabilities + drawings c) assets = liabilities + net income d) assets

### Creating a Successful Financial Plan

CHAPTER 11 Creating a Successful Financial Plan The Importance of a Financial Plan Financial planning is essential to running a successful business and is not that difficult! Common mistake among business

### RAPID REVIEW Chapter Content

RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

### Financial Transactions and Fraud Schemes

Financial Transactions and Fraud Schemes Accounting Concepts 2013 Association of Certified Fraud Examiners, Inc. Accounting Basics Assets = Liabilities + Owners Equity Accounting Basics By definition,

### Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

### Course 1: Evaluating Financial Performance

Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating

### PROFIT PLANNING OR: MANAGEMENT ACCOUNTING (Part I)

PROFIT PLANNING OR: MANAGEMENT ACCOUNTING (Part I) by Murray Rumack, FCA, MIMC (The following is the first of a two-part series which represents an address given by Mr. Rumack, a principal in the Toronto

### Evaluate Performance: Balance Sheet

Excerpted from FastTrac GrowthVenture Financial statements and reports must be read together to learn the whole financial story. For example, an Income Statement may report a large sale to a new customer,

### Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

### The Statement of Cash Flows Direct Method

23 The Statement of Cash Flows Direct Method DEMONSTRATION PROBLEM The financial statements of Bolero Corporation follow. Copyright Houghton Mifflin Company. All rights reserved. 1 Bolero Corporation Income

### Ratios from the Statement of Financial Position

For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends

### Chapter 13 Financial Statements and Closing Procedures

Chapter 13 - Financial Statements and Closing Procedures Chapter 13 Financial Statements and Closing Procedures TEACHING OBJECTIVES 13-1) Prepare a classified income statement from the worksheet. 13-2)

### ACCOUNTING 105 CONCEPTS REVIEW

ACCOUNTING 105 CONCEPTS REVIEW A note from the tutors: This handout is designed to help you review important information as you study for your cumulative final exam. While it does cover many important

### Budgeting and Measuring Your Financial Health. Assignments

Financial Plan Assignments Assignments While the previous chapter helped you determine where you wanted to be, this chapter helps you see where you are right now. Financial statements help you understand

### tutor2u Working Capital Introduction to the Management of Working Capital AS & A2 Business Studies PowerPoint Presentations 2005

Working Capital Introduction to the Management of Working Capital AS & A2 Business Studies PowerPoint Presentations 2005 Introduction All businesses need cash to survive Cash is needed to: Invest in fixed

### Your Guide to Profit Guard

Dear Profit Master, Congratulations for taking the next step in improving the profitability and efficiency of your company! Profit Guard will provide you with comparative statistical and graphical measurements

### PREPARING FINAL ACCOUNTS. part

15_1312MH_CH09 27/1/05 8:38 am Page 87 PREPARING part 3 FINAL ACCOUNTS 9 The final accounts of sole traders 10 Accounting principles, concepts and policies 11 Depreciation and fixed assets 12 Bad debts

### Transaction Analysis SPOTLIGHT. 2 Chapter 40878 Page 53 09/25/07 jhr APPLE COMPUTER, INC.

2 Chapter 40878 9/25/07 3:18 PM Page 53 2 Transaction Analysis 2 Chapter 40878 Page 53 09/25/07 jhr SPOTLIGHT APPLE COMPUTER, INC. How do you manage your music library? You may use Apple Computer s itunes,

### 1. \$45000 2. \$108000 3. \$63000 4. \$135000

For the last several years Monte Cristo Corp. has operated with a gross profit rate of 30%. On January 1 of the current year, the company had on hand inventory with a cost of \$150,000. Purchases of merchandise

### Cash in bank checking account \$22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total \$30,690 Requirement 2

Chapter 7 Solutions EXERCISES Exercise 7 2 Cash and cash equivalents includes: Cash in bank checking account \$22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total

### Financial Ratio Analysis A GUIDE TO USEFUL RATIOS FOR UNDERSTANDING YOUR SOCIAL ENTERPRISE S FINANCIAL PERFORMANCE

Financial Ratio Analysis A GUIDE TO USEFUL RATIOS FOR UNDERSTANDING YOUR SOCIAL ENTERPRISE S FINANCIAL PERFORMANCE December 2013 Acknowledgments This guide and supporting tools were developed by Julie

### Components of a Business Model Core Strategy 1-5 Strategic 1-5 Partnership 1-5 Customer 1-5 Resources Network Interface

ENGI 8607: Business Planning and Strategy in an Entrepreneurial Environment ZipCar Dr. Amy Hsiao Lecture 5 Memorial University of Newfoundland ZipCar Components of a Business Model How It Works http://www.zipcar.com/cambridge/findcars?zipfleet_id=94396