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Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
Understanding financial statements
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Understanding financial statements

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An introduction to the three main financial statements using a tree analogy.

An introduction to the three main financial statements using a tree analogy.

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

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