Balance Sheet
The balance sheet is an extrapolated version of what?
The accounting equation: A = L + OE
The income statement is also referred to as what?
P&L
Profit and Loss
Managers, Leadership, Executives
OE reconciliation answers what question?
What is the value of the owner’s equity in the business?
What are financial ratios?
Financial ratios are relationships determined from a company's financial information and used for comparison purposes
The balance sheet deals with which three permanent accounts?
Assets, Liabilities and Owner's Equity/Stakeholder Equity
Sales is also referred to as what? (There are 3 we covered in class).
Revenue, Fees, Top Line dollars
Who are external decision makers outside of a company?
Investors and Creditors
The income or earnings of the company are split between which groups?
Investors in the form of dividends and the company itself in the form of retained earnings?
Who uses financial ratios?
Business owners, managers, bankers, investors and analysts.
Assets are listed in their ease of conversion into what? Also referred to as what?
2 part question.
Cash and Liquidity
At the end of the fiscal period, what are temporary accounts reset to?
What does it mean if you or a company have a negative net worth?
Your liabilities outweigh your assets. You owe more than you own or can pay back.
Net income does not equal cash is a fact. Why is this statement true?
Revenue reported does not always equal cash collected.
Expenses reported does not always equal cash paid.
What are the 4 ratios from the balance sheet we reviewed in class?
Working capital, current ratio, quick ratio, and debt to equity.
What is the separate entity assumption?
Requires that a business’s financial reports include only the activities of the business and not those of its stockholders.
What type of accounts flow to the income statement? What are they?
Temporary. Revenue and Expense
Plant, equipment and land are what type of accounts?
Assest
What are the 4 main pieces that make up the cash flow statement?
Cash flows from operating activities
Cash flow from investing activities.
Cash flow from financing activities.
Net increase or decrease in cash.
If year 1 sales are $350,750 and year 2 sales are $899,900 solve for the year over year increase or decrease to determine the trend.
Based on your answer, what advice do you have for sales management and the department?
yr2-yr1 = difference.
Difference / yr1. = % up or down
$899,900 - $350,750 = $549,150
$549,150 / $350,750 = 1.5656*100 = 156.56%
Keep doing what you are doing to see this again!
2 part question.
If assets = $180,000. Liabilities = $40,000 and OE = $120,000 is everything correct in the balance sheet?
Does the company rely heavily on debt?
No equation not balanced. L+OE = $160,000 and it should be $180,000.
They have more equity than liabilities so they do not rely heavy on debt
What is the equation for Gross Margin? Solve for GM$ and percent if my revenue is $50,000 and my COGS to produce my products is $15,000.
Sales - COGS = GM$
GM$/Sales = GM%
$50,000-$15,000 = $35,000 GM$
$35,000/$50,000 = 70% GM
When creating any financial statement, what 4 pieces of information are needed? List in order and explain.
1. Name of the Company
2. Name of the statement
3. Date of acct period ending
4. dollars in thousands
In the expanded accounting equation, what is the equation for equity?
(Contributed Capital - Dividends) + (Revenue - Expenses)
Explain the relationship between income statement, balance sheet, retained earnings and cash flow.
Net income flows from the Income Statement to the Statement of Retained Earnings. Ending Retained Earnings flows from the Statement of Retained Earnings to the Balance Sheet. Cash on the Balance Sheet and Cash at the End of the Year on the Statement of Cash Flows agree.