essential guide to finance

Essential guide to finance

http://blogs.terrapinn.com/total-asset/

Produced by

Gain an overview of basic financial statements


In this essential guide to finance, you can learn all about:

1. Balance sheet

2. Income statements

3. Cash flow statement


Balance sheet equation

E + L = Aor

E = A - L

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)

(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

Liabilities Assets

Equity


(d) Sample balance sheet

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


e) Balance sheet equation

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


Income statement

(a) The income statement refers to what has happened during the past 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


(b) Sample 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

Other operating income 17,839 12,265

Selling expenses (-) 498,378 449,422

Administration expenses (-) 427,003 382,254

Profit of disposal of investments and property 26,814 184,722

Profit from operations 394,175 513,136

Finance costs (-) 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


(c) Sample income statement analysis

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


Cash flow statementThe cash flow statement simply shows cash in and cash outThere are three forms of cash flow:

(a) Operating cash flows (Cash Out)

Cash In

> Receipts from customers> Dividends received> Interest received

Cash Out

> Payments to suppliers and employees> Income tax paid> Interest paid

(b) Investing cash flows (Cash In)

Cash In

> Proceeds from property, plant and equipment> Proceeds from sale of investments> Proceeds from sale of companies and businesses

Cash Out

> Payments property, plant and equipment> Payments for investments> Acquisitions of companies and businesses


(c) Financing cash flows

Cash In

> Proceeds from new borrowings> Proceed from share issues

Cash Out

> Payments on borrowings> Return/buy-back of shares> Dividends paid


Get a free sample of the 12 Hour MBA in Finance training course now!

Find out what the course is all about..


Introducing David

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.


I thought you might be interested in reading what some past delegates have to say about our 3 Day MBA in Finance.

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


Wondering if you know all there is to know about 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.


Wed love to meet you tooWe 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.


Join the conversation

Wed love to hear your views on all of this

Click here to sign up for the Total Assets blog e-newsletter for updates on strategy and investment for the oil and gas industry.

Click here to leave a comment on the Total Assets blog

Click here to contribute to our LinkedIn discussion

Click here to follow us on Twitter

Click here to view our YouTube page

essential guide to finance

Documents