Receita KIWIFF

Title:
A Crash Course on Understanding Financial Statements
Word Count:
629
Summary:
If you're in business or learning to value a business it's important that you learn
how to understand financial statements. While they may be confusing to glance at,
the information that's important is easy to find.
Keywords:
financial statements, business bookeeping
Article Body:
Financial statements (or financial reports) are a record of a business� financial
flows and levels.
The big four statements are:
1.Balance sheet which describes a company's assets and liabilities.

2.Income statement which describes a company's income and expenses.
3.Statement of Cash Flows which describes how corporate operating, investment, and
financing activities have affected the company's cash position.
4.Statement of Retained Earnings which describes changes to shareholders equity
(for example a payment of dividend).
Because these statements are often complex an extensive set of Notes to the
Financial Statements and management discussion and analysis is usually included.
The notes will typically describe each item on the Balance Sheet and Income
statement in further detail. In many cases the notes are much longer than the
financial statement they are elucidating.
If a company has extraordinary items that affect the balance sheet or the
shareholders equity position it will usually include a Other Comprehensive Income
Statement, which describes the adjustments to made. Examples of Other Comprehensive
Income include revaluation of corporate assets away from their stated cost, as well
as accruals for liabilities.
Income Statement: An income statement, otherwise known as a profit and loss

statement, is a summary of a company�s profit or loss during any one given period
of time, such as a month, three months, or one year. The income statement records
all revenues for a business during this given period, as well as the operating
expenses for the business. It is very important to format an income statement so
that it is appropriate to the business being conducted. Income statements, along
with balance sheets, are the most basic elements required by potential lenders,
such as banks, investors, and vendors. They will use the financial reporting
contained therein to determine credit limits.
Statement of Changes in Financial Position: A statement of changes in financial

position (also referred to as the Cash flow Statement) reports the amount of cash
coming in (cash receipts) and the amount of cash going out (cash payments or
disbursements) during a specified period. Business activities result in either a
net cash inflow (receipts greater than payments) or a net cash outflow (payments
greater than receipts) during a period. The cash flow statement shows the net
increase or decrease in cash during the period and the cash balance at the end of
the period. It explains the causes for the changes in the cash balance. The cash
flow statement covers a span of time.�
Balance Sheet: A balance sheet, in formal bookkeeping and accounting, is a
statement of the book value of a business or other organization or person at a
particular date, often at the end of its "fiscal year," as distinct from an income
statement, also known as a profit and loss account (P&L), which records revenue and
expenses over a specified period of time.
Assets: Any item of economic value owned by an individual or corporation,

especially that which could be converted to cash. Examples are cash, securities,
accounts receivable, inventory, office equipment, real estate, a car, and other
property. On a balance sheet, assets are equal to the sum of liabilities, common
stock, preferred stock, and retained earnings.
From an accounting perspective, assets are divided into the following categories:
current assets (cash and other liquid items), long-term assets (real estate, plant,
equipment), prepaid and deferred assets (expenditures for future costs such as
insurance, rent, interest), and intangible assets (trademarks, patents, copyrights,
goodwill).
Liabilities: A liability is a present obligation of the enterprise arising from

past events, the settlement of which is expected to result in an outflow from the
enterprise of resources embodying economic benefits.
Owner's Equity: Total assets minus total liabilities of an individual or company.

For a company, also called net worth or shareholders' equity or net assets.

Receita KIWIFF

Uploaded by

Copyright:

Available Formats

Receita KIWIFF

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Receita KIWIFF

Uploaded by

Copyright:

Available Formats

Title:

A Crash Course on Understanding Financial Statements

1.Balance sheet which describes a company's assets and liabilities.

Income Statement: An income statement, otherwise known as a profit and loss

Statement of Changes in Financial Position: A statement of changes in financial

Assets: Any item of economic value owned by an individual or corporation,

Liabilities: A liability is a present obligation of the enterprise arising from

Owner's Equity: Total assets minus total liabilities of an individual or company.

You might also like