The document discusses various aspects of financial reporting. It begins by defining financial reporting as how companies show their financial performance to interested parties through financial statements. It then discusses the four main financial statements used in reporting: (1) the balance sheet, which reports a company's financial position at a point in time; (2) the income statement, which reports financial performance over a period of time; (3) the cash flow statement, which provides information beyond accrual accounting; and (4) the statement of changes in owners' equity, which reports changes in the equity section of the balance sheet. The document also provides details on the elements, purpose, and use of each financial statement type.

1. Finance &
Investment
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PRESENTED BY
Dr. Ramadan Babers
https://www.linkedin.com/in/ramadan-babers-phd-78976345/
Part_02

2. 2
Finance &
Financial Reporting

3. 3
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• Financial Reporting
2
• International Accounting Standards (IAS)
3
• Different Financial Reporting

4. 4
The way companies show
their financial performance
to investors, creditors and
other interested parties by
reporting and presenting
financial statement.
Financial Reporting

5. 5
Use the information in a
company’s financial
statements, along with
other relevant
information, to make
economic decisions
The Role of Financial Statement Analysis

6. 6International Accounting Standards (IAS)
• International Accounting
Standards (IAS) are older
accounting standards issued
by the International
Accounting Standards Board
(IASB), an independent
international standard-setting
body based in London.
• The IAS were replaced in 2001
by International Financial
Reporting Standards (IFRS).

7. 7International Accounting Standards (cont.)
1. Balance sheet (statement of financial
position)
2. Statement of comprehensive income
(income statement)
3. Cash flow statement
4. Statement of changes in owners’ equity
5. Explanatory notes, including a summary
of accounting policies

8. 8International Accounting Standards (cont.)

9. 9
Three
Tips
1- Balance
Sheet
2- Income
Statement
3- Cash Flow
Statement
4- Statement of
Changes in
Owners’ Equity
Different Financial Reporting

10. 10Balance sheet
• Also known as statement
of financial position or
statement of financial
condition
• Reports the firm’s
financial position at a
point in time

11. 11Balance sheet (cont.)
Liabilities

12. 12Balance sheet (cont.)
Balance Sheet
Elements
Assets
Liabilities
Owners’
Equity
• Resources controlled by
the firm
• Amounts owed to lenders
and creditors
• Residual interest in the net
assets of an entity; remains
after deducting liabilities
Assets Liabilities Owners’ Equity

13. 13Balance sheet (cont.)
balance sheet can be used to:
• Assess a firm’s liquidity, solvency
and ability to make distributions to
shareholders.
• From the firm’s perspective,
liquidity is the ability to meet short-
term obligations and solvency is
the ability to meet long-term
obligations

14. 14Income Statement
• statement of comprehensive reports
all changes in equity except for
shareholders transactions (e.g.
issuing stock, repurchasing stock and
paying dividends)
• Reports on the financial
performance of the firm over a
period of time

15. 15Income Statement (cont.)
Income
Statement
Elements
Core Business/
Operating Income
Investment
Income
Financing Income
• Operating income takes a
company's gross income,
which is equivalent to total
revenue minus cost of goods
sold (COGS), and subtracts all
operating expenses.
• comprises interest received on
outstanding monies and
upward adjustments to the fair
value
• Investment income is income
that comes from interest
payments, dividends, capital
gains collected upon the sale
of a security or other assets,

16. 16Income Statement (cont.)
Income
Statement
Revenues
Other Income
Expenses
• Inflows from delivering or
producing goods, rendering
services, or other activities that
constitute the entity’s ongoing
major or central operations
• Outflows from delivering or
producing goods or services
that constitute the entity’s
ongoing major or central
operations
• Includes gains that may or may
not arise in the ordinary course
of business

17. 17Cash Flows
provides information
beyond that
available from the
income statement,
which based on
accrual, rather than
cash accounting

18. 18Cash Flows (cont.)

19. 19Cash Flows (cont.)
Fast Growth Means Big Appetite for Cash
• Fast growing companies need more working
capital than those growing more slowly or not
at all
• When incoming cash flow is delayed while
fixed costs continue and paydays come every
week, there is a limit to how long a company
can operate comfortably, even if profitable

20. 20Cash Flows (cont.)
Cash Flows Statement is important as:
• Information about a company’s cash
receipts and cash payments during an
accounting period
• Information about a company’s operating,
investing, and financing activities
• An understanding of the impact of accrual
accounting events on cash flows

21. 21
Cash Flows
Elements
Operating
activities (CFO)
Financing
activities (CFF)
Investing
activities (CFI)
• Consists of the inflows and
outflows of cash resulting from
transactions that affect a firm’s
net income
• Consists of the inflows and
outflows of cash resulting from
the acquisition or disposal of
long-term assets and certain
investments
• Consists of the inflows and
outflows of cash resulting from
transactions affecting a firm’s
capital structure
Cash Flows (cont.)

22. 22Net Profit vs. Net Cash Flow
in Financial Reports
• Transactions that increase profits but
do not produce cash increase
• Transactions that decrease profits
but do not reduce cash until later
• Transactions that put cash in the
bank but do not help your profits until
later-if at all
• Transactions that take cash but may
or may not affect profits later

23. 23Statement of Changes in Owners’ Equity
• Reports the changes in the equity
section of the balance sheet
• Reports the events that increased
or decreased stockholders equity
• Shows the owner ‘s capital at the
start of the period, the changes
that affect capital, and the
resulting capital at the end of the
period

24. 24Statement of Changes in Owners’ Equity

25. End
Q & A
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