balance sheet & income statement

8/2/2019 Balance Sheet & Income Statement

1/12

Financial Statements

Formal records of a business' financial

activities

Financial reports


2/12

BALANCE SHEET

Financial position or condition, reports on acompany's assets, liabilities, and netequity as of a given point in time


3/12

Balance Sheet: Classification

Equity and Liabilities Assets

Property, plant, and

equipment

Long-term

investments

Intangible assets Other assets

Current Assets

Owners equity

Capital stock

Additional paid-in

capital

Retained earnings Long-term debt

Current liabilities


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Long-Term Liabilities

Long-term obligations are those not expectedto be paid within the operating cycle.

Examples are:

obligations arising from specific financingsituations (issuance of bonds)

obligations arising from ordinary business

operations (pension obligations) obligations that are contingent (product

warranties)


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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


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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-consolidatedsubsidiaries or affiliated companies


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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 value2 Accounts receivable at net realizable value


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Additional Information in Balance Sheet

Additional information may be:

1 Information not presented elsewhere, or

2 Information that qualifies items in the balancesheet

Supplemental information examples:

Material events having an uncertain outcome

Explanations regarding accounting policies

Covenant restrictions


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Income Statement

Company's income, expenses, and profitsover a period of time


10/12

Income Statement

Sales IncomeCosts of Goods Sold - COGSGross Profit Gross ProfitCash operating expense -Operating ExpenseEBITDA Operating Profit (EBDIT)Depreciation & Amortization -DOther Income (Net) -IEBIT NOPAT (EBIT)Interest -Int

EBT EBT (PBT)Income Taxes -ITSpecial Income/Charges Other IncomeNet Income (EAT) PAT


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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 firmscashflows and, thus, the value of the firms

shares


12/12

Income StatementOperatingSection

Sales Revenueless: Cost of Goods Sold

less: Selling Expenses

less: Administrative Expenses

1

Non-OperatingSection

Add: Other Revenues and GainsLess: Other Expenses and Losses2

Income Tax3

IrregularItems

Discontinued Operations (net of tax)

Extraordinary Items (net of tax)Cumulative Effect of a Change in

Accounting Principle (net of tax)

4

Earnings per Share5

balance sheet & income statement

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