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Financial Statements and Reporting
Financial statements serve as the end product of accounting, including the income statement, balance sheet, and cash flow statement, which are utilized by both internal and external stakeholders such as management, investors, and bankers. They analyze performance through metrics like profit and loss, liquidity ratios, and asset management to assess a company's financial health. Reporting entails preparing these statements in compliance with auditing standards and regulations, often accessible through public company websites and the SEC.
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Financial Statements and Reporting
- 1. Financial Statements andReporting The End Product of Accounting
- 2. Financial Statements • IncomeStatement • Balance Sheet • Cash Flow Statement
- 3. Who looks atthem? • 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 inCompanies 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 Statementsand 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 findFinancial 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