The document provides information on financial statements and the business model canvas. It defines financial statements as documents that show a company's financial status at a specific point in time, including balance sheets, income statements, cash flow statements, and statements of retained earnings. It then explains the key elements of each financial statement. The document also defines the business model canvas as a strategic management template used to develop and document business models using nine building blocks: key partners, key activities, value propositions, customer relationships, customer segments, key resources, distribution channels, cost structure, and revenue streams. It provides an example canvas for Uber.

1. Financial Statements
and Business Model
Canvas
By
Rashmi Gowda KM
Research Analyst – Risk Intelligence at Supply Wisdom

2. What are financial
statements?
Financial statements are a set of documents that show your company’s financial status
at a specific point in time. They include key data on what your company owns and
owes and how much money it has made and spent.
There are four main financial statements:
• balance sheet
• income statement
• cash flow statement
• statement of retained earnings

3. Different Timeframes
• Financial statements may be prepared for different timeframes. Annual financial
statements cover the company’s latest fiscal year. Companies may also prepare interim
financial statements on a monthly, quarterly or semi-annual basis.
• Interim statements sometimes include fewer components than year-end statements. For
example, they may lack a cash flow statement and a statement of retained earnings.
• Financial statements generally give information for both the latest period and the prior
period to make comparisons easier. For example, a financial statement covering January
1 to December 31, 2021, would include the statements for both that year and the previous
year—January 1 to December 31, 2020.
https://investors.abbvie.com/ -IR for Abbvie
https://www.sec.gov/edgar/browse/?CIK=1543151&owner=exclude – EDGAR for Uber
technologies

4. What are the elements of financial
statements?
1. Balance sheet
• A balance sheet is a financial statement that reports a company's assets, liabilities, and
shareholder equity. The balance sheet is one of the three core financial statements that
are used to evaluate a business. It provides a snapshot of a company's finances (what it
owns and owes) as of the date of publication.
• It is based on the equation:
Assets = Liabilities + Shareholders’ Equity
https://investors.abbvie.com/ -IR for Abbvie
https://www.sec.gov/edgar/browse/?CIK=1543151&owner=exclude – EDGAR for Uber
technologies

6. Uses of the Balance
Sheet
The balance sheet gives insight into a company’s financial condition at a particular point in time. It
reflects the resources that are controlled by the company as well as how these resources were
financed.
The balance sheet can assist analysts in assessing a company’s ability to:
• pay for its near-term operating needs (liquidity position);
• meet future debt obligations; and
• make distributions to shareholders.

7. Limitations of the Balance
Sheet
• Items on the balance sheet are not all measured in the same manner; some assets and liabilities
are measured at historical cost, while others are measured based on their current market value.
The measurement method used can significantly impact the amounts that are reported.
• Items measured at the current value reflect the value that was current at the end of the reporting
period. These values can, however, change significantly after the balance sheet is prepared.
• The balance sheet does not incorporate important aspects of a company’s ability to generate
future cash flows such as its reputation and management performance.

8. 2. Income statement or Profit-Loss
Statement
An income statement shows the profitability of your business. It details how much money
your business earned and spent. The income statement is also sometimes referred to as
a profit-loss statement or an earnings statement.
• It shows your:
• revenue from selling products or services
• expenses to generate the revenue and manage your business
• net income (or profit) that remains after your expenses
There are two different types of income statement that a company can prepare such as the
single-step income statement and the multi-step income statement. Before choosing the
right type of income statement for your business, you will need to understand your
company's nature, types, and sizes.

9. Single-Step Income Statement
• As the name suggests, a single-step income statement is a simplified version of the
income statement compared to the multi-step income statement.
• When preparing the single-step income statement, this statement displays the company's
expenses and revenues without breaking down into further sub-categories. To calculate
the single-step income statement's net income, you will have to subtract the company's
total revenue from the total expenses.
• The single-step income statement is commonly used by small-sized businesses or those
in sole-proprietorship companies.
Net Profit= Total Revenue - Total Expenses

10. Multi-Step Income Statement
• The multi-step income statement is the standard format of an income statement prepared by big
corporations and all publicly listed companies.
• Three equations are used to derive the net income using the multi-step income statement. Companies
that prepare their income statement using the multi-step approach will typically breakdown their
revenues and expenses into operating and non-operating business activities.
• The three accounting equations that are used to arrive at the net income are stated below:
Gross Profit= Net Sales - Cost of Goods Sold
Operating income = Gross Profit - Operating Expense
Net Income = Operating Income + Non Operating Items
• Hence, the multi-step income statement is a more comprehensive financial report compared to the
single-step income statement. It provides a more significant and in-depth analysis of a businesses'
financial performances that is hugely beneficial for potential investors and external readers.
https://investors.abbvie.com/ -IR for Abbvie
https://www.sec.gov/edgar/browse/?CIK=1543151&owner=exclude – EDGAR for Uber technologies

12. Statement of Comprehensive Income
To supplement an income statement, a business may also prepare a statement of
comprehensive income. This reports revenues and expenses that haven’t yet been realized,
such as unrealized gains or losses from:
• financial investments
• foreign currency adjustments
• pension liabilities
A statement of comprehensive income, which covers the same period as the income
statement, reflects net income as well as other comprehensive income, the latter being
unrealized gains and losses on assets that aren't shown on the income statement. The
statement of comprehensive income gives company management and investors a fuller, more
accurate idea of income.
https://investors.abbvie.com/ -IR for Abbvie
https://www.sec.gov/edgar/browse/?CIK=1543151&owner=exclude – EDGAR for Uber
technologies

13. 3. Cash Flow
Statement
• The cash flow statement (CFS), is a
financial statement that summarizes the
movement of cash and cash equivalents
(CCE) that come in and go out of a
company. The CFS measures how well
a company manages its cash position,
meaning how well the company
generates cash to pay its debt
obligations and fund its operating
expenses. As one of the three main
financial statements, the CFS
complements the balance sheet and the
income statement.

14. How the Cash Flow Statement Is Used
• The cash flow statement paints a picture as to how a company’s operations are running,
where its money comes from, and how money is being spent. Also known as the statement
of cash flows, the CFS helps its creditors determine how much cash is available (referred to
as liquidity) for the company to fund its operating expenses and pay down its debts. The CFS
is equally important to investors because it tells them whether a company is on solid financial
ground. As such, they can use the statement to make better, more informed decisions about
their investments.
• A cash flow statement is a valuable measure of strength, profitability, and the long-term
future outlook of a company.

15. Structure of
the Cash
Flow
Statement
• The main components of the cash flow
statement are:
1.Cash flow from operating activities
2.Cash flow from investing activities
3.Cash flow from financing activities
4.Disclosure of non-cash activities, which is
sometimes included when prepared
under generally accepted accounting
principles (GAAP)

16. Cash Flow
From
Operating
Activities
The operating activities on the CFS include any
sources and uses of cash from business activities. In
other words, it reflects how much cash is generated
from a company’s products or services.
These operating activities might include:
• Receipts from sales of goods and services
• Interest payments
• Income tax payments
• Payments made to suppliers of goods and
services used in production
• Salary and wage payments to employees
• Rent payments
• Any other type of operating expenses

17. Cash Flow
From
Investing
Activities
• Investing activities include any sources and
uses of cash from a company’s investments.
Purchases or sales of assets, loans made to
vendors or received from customers, or any
payments related to mergers and acquisitions
(M&A) are included in this category. In short,
changes in equipment, assets, or investments
relate to cash from investing.
• Changes in cash from investing are usually
considered cash-out items because cash is
used to buy new equipment, buildings, or short-
term assets such as marketable securities. But
when a company divests an asset, the
transaction is considered cash-in for calculating
cash from investing.

18. Cash Flow From
Financing
Activities
• Cash from financing activities includes the
sources of cash from investors and banks, as
well as the way cash is paid to shareholders.
This includes any dividends, payments for stock
repurchases, and repayment of debt principal
(loans) that are made by the company.
• Changes in cash from financing are cash-in
when capital is raised and cash-out when
dividends are paid. Thus, if a company issues a
bond to the public, the company receives cash
financing. However, when interest is paid
to bondholders, the company is reducing its
cash. And remember, although interest is a
cash-out expense, it is reported as an operating
activity—not a financing activity.

19. Limitations
of the Cash
Flow
Statement
• Negative cash flow should not automatically raise
a red flag without further analysis. Poor cash flow
is sometimes the result of a company’s decision
to expand its business at a certain point in time,
which would be a good thing for the future.
• Analyzing changes in cash flow from one period
to the next gives the investor a better idea of how
the company is performing, and whether a
company may be on the brink of bankruptcy or
success. The CFS should also be considered in
unison with the other two financial statements
https://investors.abbvie.com/ -IR for Abbvie
https://www.sec.gov/edgar/browse/?CIK=1543151&
owner=exclude – EDGAR for Uber technologies

20. 4. The
Statement
of
Changes
in Equity
• The Statement of Changes in Equity
compounds the changes in Owners’
Equity that have occurred during a
certain period. If ABC Corporation
issued some share capital or
distributed dividends to its
stockholders, one can see that in the
Statement of Changes in Equity

22. How are the 3 Financial
Statements Linked?
• The 3 financial statements are all linked and
dependent on each other. In financial modeling,
your first job is to link all three statements
together in Excel, so it’s critical to understand how
they’re connected.

24. Business
Model Canvas

25. What is
Business
Model
Canvas?
• The Business Model Canvas is a strategic
management template used for developing
new business models and documenting existing
ones. It offers a visual chart with elements
describing a firm's or product's value
proposition, infrastructure, customers, and
finances, assisting businesses to align their
activities by illustrating potential trade-offs.
• The nine "building blocks" of the business model
design template that came to be called the
Business Model Canvas were initially proposed in
2005 by Alexander Osterwalder

26. 9 Building Blocks
• The right side of the BMC
focuses on the customer
(external), while the left side of
the canvas focuses on the
business (internal).
• Both external and internal
factors meet around the value
proposition, which is the
exchange of value between your
business and your
customer/clients.

27. Explanation
on Building
blocks
• Key Partners
i. Who are your key partners/suppliers?
ii. What are the motivations for the partnerships?
• Key Activities
i. What key activities does your value proposition require?
ii. What activities are important the most in distribution
channels, customer relationships, revenue stream…?
• Value Proposition
i. What core value do you deliver to the customer?
ii. Which customer needs are you satisfying?
• Customer Relationship
i. What relationship that the target customer expects you
to establish?
ii. How can you integrate that into your business in terms
of cost and format?
• Customer Segment
i. Which classes are you creating values for?
ii. Who is your most important customer?

28. Explanation
on Building
blocks
• Key Resources
i. What key resources does your value proposition
require?
ii. What resources are important the most in distribution
channels, customer relationships, revenue stream…?
• Distribution Channel
i. Through which channels that your customers want to
be reached?
ii. Which channels work best? How much do they cost?
How can they be integrated into your and your
customers’ routines?
• Cost Structure
i. What are the most cost in your business?
ii. Which key resources/ activities are most expensive?
• Revenue Stream
i. For what value are your customers willing to pay?
ii. What and how do they recently pay? How would they
prefer to pay?
iii.How much does every revenue stream contribute to the
overall revenues?

29. Example: Business Model Canvas of Uber

30. Benefits of Business
Model Canvas
• Simplifies Complexity: This visual representation makes it easier for
entrepreneurs, team members, and stakeholders to grasp the core components of
the business without getting lost in a lengthy business plan. It’s a powerful tool for
distilling complex ideas into a clear, concise format.
• Enhances Focus: When creating a BMC, you’re prompted to think critically about
each building block, such as customer segments, value propositions, and revenue
streams. This process encourages a deep understanding of how these components
interact and depend on each other.
• Promotes Collaboration: The BMC is designed to be a collaborative tool. It’s not
something a single person creates in isolation; instead, it encourages cross-
functional teams to work together. Each team member can contribute their
expertise to fill in the relevant sections. This collaborative approach ensures that
everyone involved in the project shares a common understanding of the business
model, which is essential for successful execution.
• Iterative and Adaptable: Business environments are dynamic, and your business
model should be too. The BMC supports an iterative approach, allowing you to
make changes and updates as needed. For instance, if market conditions change,
you can easily adjust your value propositions or customer segments. It’s a flexible
tool that accommodates experimentation and learning.
• Cost-Effective: Creating a traditional business plan can be a time-consuming and
expensive process. In contrast, developing a BMC is a cost-effective alternative. It
doesn’t require extensive resources or financial investments.

31. Thank You
“Whenever you see a successful business, someone once
made a courageous decision.”
— Peter F. Drucker, Management Consultant, Educator,
and Author

32. Assignment
Download 10K release of any E-commerce Company. Write a
report on its financial health analyzing its financial
statements. Also prepare a Business Model Canvas for the
same company