FIN/380

What is a financial statement? How can they help the financial manager? What are the types of financial statements?

Statement of Financial Position What it reveals Why it is important Statement of Activities Content of the statement Importance of the statement Statement of Cash Flows What it shows Why it matters

Expenses o Program Service o Public Awareness and Education o Fund Raising o Losses on Contributions Received Revenues and Gains o Contributions o Government Grants o Donations-in-kind o Other Income GAAP Guidelines o SAS 69

IRS Form 990 o Revenue Statement o Balance Sheet o Statement of Functional Expenses o Expenses set apart by individual program service o Support schedule that features revenue sources

Management team and board need sound financial data to Assess liquidity Set and monitor desired liquidity level Balance cash inflows and outflows over the near future and longer-term future Internal financial statements Enable the measurement of financial position through ratio analysis Utilize statements of financial positions and activities to make liquidity, funding and operating ratio analyses

Financial statements are instrumental to internal users Aid in the accurate representation of financial situation Support the fulfillment of the company’s mission and provide proof of accountability Assist in the facilitation of necessary changes by management Two financial statements that are valuable to the management Statement of Financial Position/Balance Sheet Statement of Activity/Statement of Net Revenues The statement of cash flows seems to be of greatest importance It is crucial for management to know the amounts of cash inflows/outflows to secure future operations

Benefits internal decision making process Is useful in the development of internal reports Internal metrics Summary reports Conduct of financial ratio analysis Audit reports Target liquidity level Balancing of cash inflows and outflows Variance analysis Influences internal control process

Statement of Cash Flows Used in cash flow projection Statement of Activities and Statement of Financial Position Used in the computation of financial ratios Used for variance analysis Statement of Financial Position & Statement of Cash Flows Used in the development of reports on target liquidity levels

Zietlow, Hankin, Seidner (2007) “Chapter 6: Understanding Accounting Basics and Financial Statements. ______________from