An overview of Financial Statements and Reporting with an emphasis on getting students familiar with the process and aware of the requirements and why it is important.

1. Financial Statements and Reporting
The End Product of Accounting

2. Financial Statements
• Income Statement
• Balance Sheet
• Cash Flow Statement

3. Who looks at them?
• Internal & External (to
the Company)
• Management
• Competitors
– benchmarking
• Investors
• Bankers

4. Management
• Internal information
• How are we doing?
• Performance
• Many divisional and
department Managers
have “P&L” responsibility
• P&L means Profit and
Loss
• They have to make money
for the company

5. Investors
• Invest in Companies
with strong financial
performance so their
money can grow.

6. Bankers
• Credit Analysis
• Debt Coverage Ratios
• Financial Statement
Analysis

7. Income Statement
• Revenue
• - Expenses
• = Net Income (also
called Profit or
Earnings)

8. Balance Sheet
A = L + E
Assets
• Cash
• Account Receivable
• Tangible:
– Inventory
– Equipment
– Furniture
– Computers
– Buildings & Land
• Intangible
– Patents &
– Intellectual Property (like
copyrights and trademarks)
– Brand
Liabilities and Equity
• Accounts Payable
• Short term debt
• Long term debt
• Equity

9. Analysis
• Performance Ratios
• Assets to Liabilities
• Profits as % of Sales
• Quick ratio
– Current Assets/Current
Liabilities
• Net Income/Employee
• Sales/Square Foot
• Inventory Turnover
• Liquidity

10. Liquidity & Solvency
• Liquidity is cash on hand;
Solvency is ability to pay
debts
• How quickly you can turn an
asset into cash
• Cash is King
• On the balance sheet,
assets are ranked by
liquidity
• How much cash do you
have on hand
• What are the current
obligations? (Liabilities)

11. Reporting
• Prepare Financial
Statements and Notes
• Auditing/Rules
– CPAs Certified Public
Accounting
– GAAP Generally Accepted
Accounting Principals
– FASB Financial Accounting
Standards Board
• Regulatory/Government
– Securities and Exchange
Commission

12. Where to find Financial Statements
• Publicly traded
companies
• SEC.gov
• Websites of companies
• Investor Websites

13. 10K What's Inside
• Description
• History
• Competition
• MD&A Management
Discussion and Analysis
• Audited Financials
• Notes