1. Basic Financial Statements
Marketing I

2. Balance Sheet
Balance Sheet: reports company’s assets, liabilities, and owners equity
Assets: anything of monetary value
Liabilities: amounts owed by a business
Equity: net worth

3. Assets, Liabilities, Equity
Current assets are cash and anything of value that can be converted into cash in a year
Example: cash in the bank, accounts receivable (money owed to you by customers), inventory
Liabilities:
Current liabilities are the debts the business must pay during the upcoming business year
Example: accounts payable (money owed to suppliers), notes payable (money owed to bank), taxes payable, money owed to employees for salaries
Equity:
Assets – Liabilities = Net Worth (Equity)

4. Income Statement
Income Statement: business's profit and loss over a given period of time
Include income from:
Sales revenue
Investments
Costs
Expenses

5. Profit v. Loss
Profit & Loss Statement: reflect the ongoing operations of a firm
Profitable company generates more income than it pays out for goods and expenses
Company loss = costs and expenses exceed all revenue

6. Company Net Worth Net Worth: difference between assets and liabilities
Net Worth = assets – debts
Stockholder’ Equity is corporation net worth
Owner’s Equity is sole proprietorship net worth

7. Small Business Administration
Small Business Administration: role to support business and encourage Free Enterprise System
Provides counseling and educational materials to prospective business owners

8. Class Activity
What is the difference between an asset and a liability?
How can a company determine if it has made a profit or incurred a loss?
How does a company determine its net worth?
What information can be seen on an income statement? On a balance sheet? Why is this information important?
What might happen if an entrepreneur did not include financial documents in a business plan?
How are a business's one-time start-up costs different from its continuing costs?
How does the Small Business Administration (SBA) help businesses plan their financial needs?