Analysis of the Financial Statements Flashcards
Financial Statements
Financial Statements are the principal means through which financial information is communicated to those outside of an organization.
4 most used FS
The Balance Sheet
The Income Statement
The Statement of Cash Flow
The Statement of Changes in shareholders equity.
Balance Sheet
The Balance Sheet reports a company‘s assets, liabilities and the shareholder‘s equity at a specific point of time
It provides the basis for COMPUTING RATES OF RETURN and evaluating its CAPITAL STRUCTURE.
It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.
The most common ratios from BS are:
Accounts receivable collection period = (Av. A/R / Net Credit Sales) * 365
D/E ratio = total liabilities/shareholders’ equity
Inventory turnover = COGS/Av. Inventory (4-6)
WC turnover ratio = Net Sales/Av. WC
Days of Sales Outstanding
= (Av. A/R / Net Credit Sales) * 365
Accounts receivable collection period
D/E ratio
total liabilities/shareholders’ equity
Inventory turnover
Inventory turnover = COGS / Av. Inventory
4-6
WC turnover ratio
= Net Sales/Av. WC
WC ratio
= CA / CL
Equity ratio
Equity / Assets
Debt ratio
debt/ Assets
Income Statement
An Income Statement is a financial statement that reports a company`s FINANCIAL PERFORMANCE over a specific accounting period.
Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non operating activities.
It also shows the net profit or loss incurred over a specific accounting period.
Unlike the Balance Sheet, which covers one moment in time, the Income Statement provides performance information OVER A PERIOD d of time.
The Income Statement is divided into two parts: Operating and Non-operating activities
Operating section of Income statement
section discloses information about revenues and expenses that are a DIRECT result of the regular business operation;
The non-operating section of Income statement
discloses revenues and expenses information about activities that are NOT directly linked to a company`s regular operation. (sale of assets and securities etc.)
Income Statement Order
Total Sales
-Cost of goods sold
=GROSS PROFIT
-Sales expenses
-Adminstration expenses
- Other operating expenses
= EBITDA (Operating Profit)
-Depreciation
=EBIT
-Interest income/expenses
EBT
- Taxes
NET Profit/Loss
