Financial Statements

Formal records of a business' financial activities

Financial reports

Financial position or condition, reports on a company's assets, liabilities, and net equity as of a given point in time

BALANCE SHEET

Balance Sheet: Classification

Equity and Liabilities

Assets

Owners equity Capital stock Additional paid-in capital Retained earnings Long-term debt Current liabilities

Property, plant, and equipment Long-term investments Intangible assets Other assets Current Assets

Long-Term Liabilities
Long-term obligations are those not expected to be paid within the operating cycle. Examples are: obligations arising from specific financing situations (issuance of bonds) obligations arising from ordinary business operations (pension obligations) obligations that are contingent (product warranties)

Current Liabilities
Current liabilities are liquidated:
1 Either through the use of current assets, or 2 By creation of other current liabilities

Examples:
Payables resulting from acquisitions of goods and

services Collections received in advance of services Other liabilities which will be paid in the short term

Long-Term Investments
1 Investments in securities (bonds, stock)

2 Investments in fixed assets (land not used

in operations) 3 Investments set aside in special funds (e.g., sinking fund) 4 Investments in non-consolidated subsidiaries or affiliated companies

Current Assets
Current assets are expected to be consumed, sold, or converted into cash either in one year or in the operating cycle, whichever is longer. Current assets are presented in order of liquidity. The following valuation principles are used: 1 Short-term investments at fair value 2 Accounts receivable at net realizable value

Additional Information in Balance Sheet

Additional information may be: 1 Information not presented elsewhere, or 2 Information that qualifies items in the balance sheet Supplemental information examples: Material events having an uncertain outcome Explanations regarding accounting policies Covenant restrictions

Company's income, expenses, and profits over a period of time

Income Statement

Income Statement
Sales Income Costs of Goods Sold - COGS Gross Profit Gross Profit Cash operating expense -Operating Expense EBITDA Operating Profit (EBDIT) Depreciation & Amortization -D Other Income (Net) -I EBIT NOPAT (EBIT) Interest -Int EBT EBT (PBT) Income Taxes -IT Special Income/Charges Other Income Net Income (EAT) PAT

Income Statement
Gross Profit = Sales - Costs of Goods Sold EBITDA = Gross Profit - Cash Operating Expenses EBIT = EBDIT - Depreciation - Amortization EBT = EBIT - Interest NI or EAT = EBT- Taxes Net Income is a primary determinant of the firms cashflows and, thus, the value of the firms shares

Income Statement
Operating Section
Sales Revenue less: Cost of Goods Sold less: Selling Expenses less: Administrative Expenses Add: Other Revenues and Gains Less: Other Expenses and Losses

Non-Operating 2 Section 3 Income Tax Irregular Items

Discontinued Operations (net of tax) Extraordinary Items (net of tax) Cumulative Effect of a Change in Accounting Principle (net of tax)

5 Earnings per Share