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Understandingfinancialstatements geni whitehouse

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  • 1. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Understanding Financial Statements By Geni Whitehouse, CPA Countess of Communication
  • 2. Sponsored by: Connect With Sage
  • 3. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Imagine your business is a tree.
  • 4. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Imagine your business is a tree. A fruit-bearing tree.
  • 5. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Imagine your business is a tree. A fruit-bearing tree. Like an apple tree.
  • 6. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse This is your business.
  • 7. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The income statement measures the fruits of your business efforts.
  • 8. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Like a tree, your business produces an annual yield...
  • 9. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse ...that gets reset every year.
  • 10. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Income Statement starts at zero at the beginning of every year and measures the annual yield.
  • 11. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Profit = Revenue – Expenses Above the line
  • 12. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Department Focus Bottom Line Profit = Revenue – Expenses Above the line
  • 13. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse At the end of each year,
  • 14. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse At the end of each year, net earnings (or Net Income) is added to
  • 15. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse At the end of each year, net earnings (or Net Income) is added to Retained Earnings on the Balance Sheet.
  • 16. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse At the end of each year, net earnings (or Net Income) is added to Retained Earnings on the Balance Sheet.
  • 17. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Balance Sheet is a picture in time.
  • 18. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Balance Sheet is a picture in time. It measures the cumulative result of your business efforts.
  • 19. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Balance Sheet is a picture in time. It measures the cumulative result of your business efforts. It sustains your business over the long haul.
  • 20. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse A tree can not bear fruit without the support of a strong trunk.
  • 21. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse A business can not produce annual Net Income without a solid Balance Sheet. A tree can not bear fruit without the support of a strong trunk.
  • 22. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Balance Sheet measures what you own and what you owe.
  • 23. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Balance Sheet measures what you own and what you owe. What you own is called your Assets. What you owe is called your Liabilities.
  • 24. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The equity section is the difference between the two. Assets – Liabilities = Equity
  • 25. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The equity section is the difference between the two. Assets – Liabilities = Equity Equity approximates the net value of your business. Equity is sometimes called Net Worth.
  • 26. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse If you slice open the trunk of a tree, you can read the story of each year in its life.
  • 27. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse You will find lean years... ...with little or no Net Income.
  • 28. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse And strong years... ...with plentiful Net Income.
  • 29. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Those rings are like the equity section of the Balance Sheet.
  • 30. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Those rings are like the equity section of the Balance Sheet. Accumulated Retained Earnings = Equity
  • 31. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Equity = Assets – Liabilities
  • 32. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse What you Own Equity = Assets – Liabilities
  • 33. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse What you Own What you Owe Equity = Assets – Liabilities
  • 34. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse What you Own What you Owe Accumulated Earnings Equity = Assets – Liabilities
  • 35. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Without water, no tree can survive for long. No business can survive without cash.
  • 36. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Cash Flow Statement shows where the water went in your business.
  • 37. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse How much cash was consumed by the Income Statement? Income Statement
  • 38. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse How much cash was consumed by the Income Statement? Income Statement Balance Sheet How much cash was consumed in growing the Balance Sheet?
  • 39. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Cash Flow Statement connects the Income Statement to the Balance Sheet.
  • 40. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse The Cash Flow Statement connects the Income Statement to the Balance Sheet. The answer is on the Statement of Cash Flows. “If I produced Net Income this year, where did the money go?”
  • 41. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Net Increase (Decrease) (3,700)
  • 42. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Net Increase (Decrease) (3,700) ...keeps the business running Operating cash flow ...
  • 43. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Net Increase (Decrease) (3,700) ...keeps the business running Operating cash flow ...
  • 44. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Income Statement
  • 45. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Income Statement Balance Sheet
  • 46. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Income Statement Balance Sheet Statement of Cash Flows Success in business requires a focus on all three financial statements.
  • 47. Sponsored by: Connect With Sage
  • 48. @Evenanerd on Twitterwww.evenanerd.com Copyright © 2013 Geni Whitehouse Concepts by Geni Whitehouse Even a Nerd Can Be Heard Artwork (if you can call it that) also by Geni Whitehouse. www.evenanerd.com The End