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Essential guide to finance

Gain an overview of basic financial statements

Produced by

1. Balance sheet
2. Income statements
3. Cash flow statement

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In this essential guide to

finance, you can learn all
about:

The balance sheet shows the financial

position of an organization at a
particular time
(a) Assets Things that you own
e.g. cash at bank, motor vehicles, houses etc.
*also includes things like account receivable/
debtors (money owed to you) and inventory (stock)

Equity

Liabilities

Assets

E+L=A
or
E=A-L

(b) Liabilities Something that you owe

e.g. debts, money you owe to the bank, tax office
etc.
*includes money you owe to employees and
suppliers
(c) Equity Difference between the assets and
liabilities
i.e. your net wealth
*one side should always equal the other

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Balance sheet equation

Total current assets

1,175,244

1,009,301

Total non-current assets

1,233,906

1,076,909

Total assets

2,409,150

2,086,210

Total current liabilities

686,725

640,847

Total non-current liabilities

415,579

369,186

Total liabilities

1,102,304

1,010,033

Net assets

1,306,846

1,076,177

Total shareholders equity

1,306,846

1,076,177

*Net assets = Total assets + Total liabilities = Net assets = Total shareholders equity

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(d) Sample balance sheet

What you own What you owe = What you are worth
Assets Liabilities = Equity
A L = Contributions + Retained Profits + Reserves
A L = SC + RP + Res
A L = SC + Opening RP + Profits this year Dividends + Res
A L = SC + Opening RP + Revenue Expenses Dividends + Res

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e) Balance sheet equation

(a) The income statement refers to what has happened during the past <period> to get you to your current
position. It brings you to the balance sheet you had previously to the balance sheet that reflects on your
current status.
Revenues sales, interest revenue, rent *most of these revenues associated with assets e.g. The rent you
get for being the landlord
Expenses electricity, wages, depreciation *many different types of expenses
Current Position is what you achieve with this information
Revenues Expenses = Current Position

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Income statement

2012
($)

2011
($)

Sales revenue

3,399,504

3,113,819

Cost of sales (-)

2,124,601

1,965,994

Gross profit

1,274,903

1,147,825

17,839

12,265

Selling expenses (-)

498,378

449,422

Administration expenses (-)

427,003

382,254

26,814

184,722

394,175

513,136

64,859

67,610

Profit before income tax

329,316

445,526

Income tax expenses

117,612

105,142

Profit after income tax

211,704

340,384

Other operating income

Profit of disposal of investments and property

Profit from operations
Finance costs (-)

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(b) Sample income statement

 The follow information is an example taken from a sample income statement from Shobenlu Retailers PTE LTD

Example, the statement is titled as:

SHOBENLU RETAILERS PTE LTD
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2012

It is important to take into account the income statement is FOR THE YEAR, rather than a set point of time.
A set point of time is what the balance sheet shows.
Also significant to know that income statements can take many other forms and this is just a sample.
Expenses and Profit can differ greatly

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(c) Sample income statement analysis

The cash flow statement simply shows cash in and cash out
There are three forms of cash flow:

(a) Operating cash flows (Cash Out)

Cash In

Cash Out

> Receipts from customers

> Dividends received
> Interest received

> Payments to suppliers and employees

> Income tax paid
> Interest paid

(b) Investing cash flows (Cash In)

Cash In

Cash Out

> Proceeds from property, plant and equipment

> Proceeds from sale of investments
> Proceeds from sale of companies and businesses

> Payments property, plant and equipment

> Payments for investments
> Acquisitions of companies and businesses

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Cash flow statement

Cash In

Cash Out

> Proceeds from new borrowings

> Proceed from share issues

> Payments on borrowings

> Return/buy-back of shares
> Dividends paid

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(c) Financing cash flows

Find out what the course is all about..

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Get a free sample of the

12 Hour MBA in Finance
training course now!

David runs the 3 Day MBA in Finance and 12 hour MBA and has worked with Terrapinn
providing a number of financial training courses. He has a background of working in chartered
accountancy; he had worked for many years in PricewaterhouseCoopers (in Corporate
Finance), IBM as a Financial Controller, and Macquarie Bank.
David has always had a passion for training. After a few years, it became clear to him that he
had the self proclaimed training bug and was getting much more satisfaction out of training
and explaining accounting and finance than he was gaining from actually doing accounting or
finance. He left Macquarie Bank in 2002 and since that time has been training and consulting
for a variety of organisation including Terrapinn, as well as some large, multinational law firms.

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Introducing David

Read on for their comments on the course and the trainer.

The trainer is patient to explain his knowledge.

Group HR Manager, Amazon Papyrus Chemicals Hong Kong Limited

Excellent trainer, very knowledgeable. Clear explanation of financial

concepts in a fun interactive manner.
Vice President, Parkview Group

David is crystal clear in his definitions and explanations of the way of

financial concepts.
Past attendee, DSM Nutritional Product Asia Pacific Pte Ltd

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I thought you might be interested in reading what some past

delegates have to say about our 3 Day MBA in Finance.

Would you like to learn more about accruals and prepayments, inventory, finance instruments and much more?
Why not try our 12 Hour MBA in Finance.
The 12 Hour MBA in Finance will take you through the modules covered in this E-book in much more depth.
Mr Silipo will walk you through the fundamentals of finance in an easy to manage online training course.

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Wondering if you know

all there is to know about
Finance

We also run a 3 Day MBA in Finance in various locations across the globe.
Alternatively, we can come to you. We can tailor the course to your needs and deliver the course for you and your
team.
For more information contact Lynn Chen on +65 6322 2337. Or visit our website.

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too

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