1. CHAPTER 16 FINANCIAL ANALYSIS OF A BUSINESS

2. HOW DO YOU JUDGE THE SUCCESS OF A BUSINESS?

3. WHY DO MOST BUSINESS FAIL:
POOR FINANCIAL
MANAGEMENT

4. SUCCESSFUL FINANCIAL MANAGEMENT DEPENDS ON:
KEEPING THOROUGH AND ACCURATE RECORDS
PREPARING IMPORTANT FINANCIAL REPORTS REGULARLY
INTERPRETING FINANCIAL INFORMATION IN THE REPORT
MAKING DECISIONS THAT AFFECT FUTURE FINANCIAL REPORTS

5. FINANCIAL STATEMENTS Report that summarizes financial data over
a period of time (month(s), year, life of
business)

6. FINANCIAL REPORTS USED:
INCOME STATEMENT
BALANCE SHEET

7. BALANCE SHEET
Financial report that lists assets, liabilities, and capital of a business on a specific date

8. ASSETS
anything of value owned
(cash, equipment, building, inventory)
LIABILITIES
claims against assets – debt – what is owed
(mortgage, money owed for purchases on credit)
CAPITAL
amount organization/individual is worth after
subtracting liabilities from assets

10. TOTAL ASSETS MUST EQUAL TOTAL LIABIITIES + CAPITAL
CROWN CORPORATION
Balance Sheet
December 31, 2005
LIABILITIES
ASSETS
Cash $24,000
Equipment ,000
Land & Bldg ,000
Accounts Payable $10,000
Mortgage Payable ,000
Total Liabilities $43,000
CAPITAL
Net Worth $53,000
Total Assets $96,000
Total Liabilities & Capital $96,000
TOTAL ASSETS MUST EQUAL TOTAL LIABIITIES + CAPITAL

11. BALANCE SHEET
SHOWS THE FINANCIAL CONDITION OF A BUSINESS AT A PARTICULAR POINT IN TIME

12. Starboard Corporation
BALANCE SHEET
April 20, 2011
ASSETS
Cash $ 5,000
Accounts Receivable 8,000
Merchandise Inventory ,000
Land and Buildings ,000
Total Assets $148,000
LIABILITIES
Accounts Payable $ 12,000
Mortgage Payable ,000
Total Liabilities ,000
CAPITAL
James Jones, Net Worth ,000
Total Liabilities & Capital $148,000

13. INCOME STATEMENTS

14. Financial statement that reports total revenue and expenses
INCOME STATEMENTS
Financial statement that reports
total revenue and expenses
for a specific period
such as a month or year.

15. THREE MAJOR PARTS TO INCOME STATEMENT:
1.REVENUE
Income earned for the period
2. EXPENSES
All costs incurred in operating the business
3. PROFIT OR LOSS
Difference between total revenues and total expense

16. IF REVENUES GREATER THAN EXPENSES –
COMPANY EARNED A PROFIT
IF EXPENSES GREATER THAN REVENUE –
COMPANY INCURRED A LOSS

18. INCOME STATEMENT
Profit or Loss for specific period of time: year or less
BALANCE SHEET
Financial condition of business as of a specific date

19. FOR THE YEAR ENDING DECEMBER 31, 2005
$100,000
40,000
$60,000

20. Movement of cash into and out of a business
CASH FLOW
Movement of cash into and out of a business

21. WORKING CAPITAL
DIFFERENCE BETWEEN
CURRENT ASSETS
AND
CURRENT LIABILITIES

22. WOULD YOU LEND MONEY TO THIS BUSINESS?
CURRENT ASSETS = $80,000
CURRENT LIABILITIES = 30,000
WORKING CAPITAL =

23. FOR THE YEAR ENDING DECEMBER 31, 2005
HOOVER CORPORATION
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2005
Revenue from Sales $40,000
Cost of Goods Sold ,000
Gross Profit $13,000
Operating Expenses: $ 8,000
Total Operating Expenses: ,000
Net Profit $ 5,000

25. FOR YEAR ENDING DECEMBER 31, 2006
HOOVER CORPORATION
INCOME STATEMENT
FOR YEAR ENDING DECEMBER 31, 2006
Revenue from Sales $40,000
Cost of Good Sold 27,000
Gross Profit $13,000
Operation Expenses $ 8,000
Total Operating Expenses ,000
Net Profit $ 5,000

26. JANICE JONES
BALANCE SHEET
APRIL 17, 2007
ASSETS LIABILITIES
CASH $ ACCOUNTS PAYABLE $
CLOTHING
VCR, RADIO, TAPES CAPITAL
SVGS. ACCOUNT JANICE JONES, CAPITAL 1,375.00
CHECKING ACCOUNT
TOTAL ASSETS $2, TOTAL LIABILITIES & CAPITAL $2,075.00