Accounting The Balance Sheet The Income Statement Break-Even Analysis Transportation

The Balance Sheet The Balance Sheet shows the financial position of a company on a certain date (usually the end of a month or year). It consists of Assets (on the “debit side”), Liabilities, and Stockholders’ Equity (both on the “credit side”). Debit and credit side are always in balance  Totals are equal. Therefore: Stockholders’ equity = Assets – Liabilities  The Accounting Equation

The Balance Sheet Check page 67 of Ahold’s annual report of 2014 on information/Annual-reports.htm for an example. information/Annual-reports.htm At this link, click on the arrow pointing right to find the 2014 annual report.

Assets Assets are the economic resources that are expected to benefit the company’s future operations, including: n Monetary items (cash and money that customers owe the company) n Non-monetary physical items (inventories, land, buildings, equipment) n Non-physical items or Intangible assets (patents, trademarks, copyrights)

Liabilities Liabilities are a company’s obligations to other entities in the future, including: n Amounts owed to suppliers for goods or services bought on credit  accounts payable n Borrowed money (e.g. bank loans) n Taxes owed to the government n Services to be performed

Stockholders’ equity Stockholders’ equity represents the claims by the owners of a company to the assets of the company.

The Income Statement The Income Statement summarizes the revenues earned and the expenses incurred by a company over a certain period.

The Income Statement Check page 65 of Ahold’s annual report of 2014 on information/Annual-reports.htm for an example. information/Annual-reports.htm Most important ratio based on these numbers: Profit margin = Net Income / Net Revenue x 100%

Break-even Analysis Break-even Point (BEP): The amount of products a company has to produce in order to ‘break even’  not make a loss, nor a profit. At the BEP: n Total Revenues = Total Costs n BEP = FC / (p – vc) n (p – vc) is called Contribution Margin

Transportation Special terms designate whether the seller or buyer of products/services pays for transportation costs: n FOB shipping point  Buyer pays for transportation costs n FOB destination  Seller pays for transportation costs