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Published byGregory Malone Modified over 9 years ago
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Finance Chapter 2 Financial statements
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Financial statements & reports Annual report—a report issued once a year by a corporation to its stockholders, containing: Basic financial statements Management’s analysis of the past year’s operations Management’s opinions about the future Basic financial statements Balance sheet Income statement Statement of retained earnings Statement of cash flows
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The balance sheet Assets (left side) Liabilities or equities (right side) – claims against assets Assets ordered in terms of liquidity: the length of time it takes to convert asset to cash Cash & marketable securities Accounts receivable Plant & equipment Liabilities (money owed) & equity Accounts & notes payable Accruals (a future outlay of cash) & long-term bonds Stock Retained earnings
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The income statement Summarizes revenues & expenses over an accounting period (issued quarterly) Net sales minus costs Depreciation (tangible assets) Amortization (intangible assets, e.g., patents) EBITDA – earnings before interest, taxes, depreciation, and amortization EBIT – earnings before interest and taxes
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Statement of retained earnings How much of the firms earnings were retained rather than paid out as dividends Cumulative Not a cash equivalent Normally used for re-investment
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Statement of cash flows Reports the effect of operating, investing, and financing activities on cash flows over an accounting period Differs from accounting profit
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