A PowerPoint presentation of some Financial Statements.

1. Financial
Statements:
Exploring the Balance Sheet, Income Statement,
and Statement of Cash Flows

2. Agenda
We will be discussing the purpose and
features of each financial statment
01 About Balance sheet
02 About Income statement
03 About statement of cash flows

3. Introduction
Financial
Statements
Financial statements are crucial tools for assessing the financial health and
performance of a company.
• In this presentation, we will explore the three main financial
statements: the balance sheet, income statement, and statement of
cash flows.
• By understanding these statements, you will gain valuable insights into
a company's financial position, profitability, and cash flow management.
Let's delve into each financial statement and discover their purpose and
significance in evaluating a company's financial health and performance

4. What is Balance Sheet?
The term balance sheet refers to a financial statement that reports a
company's assets, liabilities, and shareholder equity at a specific
point in time. Balance sheets provide the basis for computing rates
of return for investors and evaluating a company's capital structure.
• It provides a snapshot of a company's finances (what it owns
and owes) as of the date of publication.
Assets
Share Holder’s
Equity
Liabilities
01
Components

5. 02
Purpose of Balance Sheet
Capital
Security
Balance sheets are crucial for
securing business loans and private
equity funding by showcasing financial
health and creditworthiness.
Financial
Analysis
Managers can use balance sheet
data to calculate financial ratios,
providing insights into liquidity,
profitability, solvency, and
efficiency.
Risk Assessment
They help evaluate borrowing levels,
asset liquidity, and cash reserves,
ensuring the company can meet its
obligations.

6. 03
What are Assets
Assets represent what a company possesses and can
help determine its financial health and ability to
generate cash.
Current Assets
Non - Current Assets
These are items that can be converted into cash within a
year or less, such as cash, accounts receivable, inventory,
and short-term investments.
These are resources that are not easily converted into
cash within a year, such as property, plant, and equipment,
long-term investments, and intangible assets like patents
or trademarks

7. 04
What are Liabilities
Liabilities represent the company's financial
responsibilities and the amounts it owes to others.
They are important for assessing the company's
financial obligations and ability to meet its short-term
and long-term debts.
Current
Liabilities
Debts that need to be paid within one year
or less, including accounts payable, short-
term loans, and accrued expenses.
Non - Current
Liabilities
These are obligations that are due beyond
one year, such as long-term loans, bonds
payable, and deferred tax liabilities.

8. 05
What are Net Assets
Net Assets also known as Shareholders' equity
reflects the shareholders' ownership interest in the
company and their potential claims on the company's
assets. It represents the residual interest in a
company's assets after deducting liabilities.
Capital surplus
The amount
shareholders have
invested above the par
value of common or
preferred stock.
Retained earnings
Company's profits that
are either reinvested in
the business or used to
pay off debt.
Treasury stock
Shares that a company has
repurchased. They can be sold
later to raise cash or kept to
prevent a hostile takeover.
Preferred stock
A separate type of stock
issued by some
companies. It has a par
value that doesn't affect its
market value.

9. 06
Income
Statements
The income statement, also called the profit and loss (P&L) statement or the
statement of revenue and expense, is a financial statement that highlights a
company's revenue, expenses, gains, and losses over a specific period. It
offers important information about the company's operations, management
efficiency, areas that may not be performing well, and how it compares to
other companies in the industry.
Components
• revenue • expenses • gains • losses.

10. 07
Purpose of Income Statement
Evaluating Business
Operations
By examining the income statement,
stakeholders can gain insights into the
efficiency and effectiveness of a
company's operations.
It helps identify areas that are
performing well and those that may
need improvement.
Facilitating
Decision-Making
The income statement assists
management in making informed
decisions about various aspects of
the business, such as resource
allocation, cost management,
pricing strategies, and investment
opportunities.
Assessing
Profitability
The income statement helps
determine whether a company has
generated a profit or incurred a loss
during the specified period.
It provides insights into the company's
ability to generate revenue and control
expenses.

11. 08
Revenue
Revenue is the total amount of money a company
earns from its primary activities during a specific
period. It reflects income generated from selling
goods or services. Revenue is a key indicator of
financial performance, growth, and sustainability.
Operating revenue
Operating revenue refers to the income generated
from a company's core business activities. It includes
revenue earned from selling goods or services directly
related to its primary operations.
Non - operating revenue
Non-operating revenue refers to income generated
by a company from activities that are not directly
related to its core business operations. It includes
revenue earned from sources such as investments
etc

12. 09
Expenses
Expenses are the costs incurred by a company in its
operations, such as salaries, rent, and materials. They
are subtracted from revenue to calculate profit.
Managing expenses is vital for financial health and
profitability.
Primary - activity expense
These are all expenses incurred for earning the
average operating revenue linked to the primary
activity of the business. They include; the cost of
goods sold (COGS), selling, general, and
administrative (SG&A) expenses; depreciation or
amortization and research and development (R&D)
expenses.
Secondary expense activity
Secondary-activity expenses refer to costs incurred
by a company that are not directly related to its
core business operations. Examples of secondary-
activity expenses include administrative costs, IT
expenses, legal fees, maintenance and repair
costs, and other overhead expenses.

13. 10
Gains
Also called other income, gains indicate the net money
made from other activities, like the sale of long-term assets.
These include the net income realized from one-time non-
business activities, such as a company selling its old
transportation van, unused land, or a subsidiary company.

14. 11
Losses
Losses as expenses encompass various types of costs
incurred by a company that result in financial losses. These
expenses can arise from factors such as the sale of long-
term assets at a loss, one-time or unusual costs, or
expenses related to legal disputes.

15. 12
Statement of
Cash Flows
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.
Components
• Operating activities • investing activities • financing activities

16. 13
Purpose of Cash Flow Statements
Transparency and
Accountability
The statement of cash flows enhances
transparency by providing a detailed
breakdown of cash inflows and
outflows. It allows stakeholders,
including investors and regulatory
authorities, to evaluate the company's
cash management practices and
ensure accountability in financial
reporting.
Cash Flow
Forecasting
By analyzing historical cash flows,
stakeholders can make projections
and forecasts for future cash flows.
This helps in financial planning,
budgeting, and making strategic
decisions.
Cash Flow
Assessment
It helps assess the ability of a
company to generate and manage
cash. By analyzing cash inflows from
operating activities, investing
activities, and financing activities,
stakeholders can evaluate the cash-
generating capacity and liquidity of the
company.

17. 14
Operating Activities
The operating activities on the Cash Flow Statements
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:
• Payments made to suppliers of goods and services used in production
• Receipts from sales of goods and services • Salary and wage payments to employees
• Interest payments • Income tax payments • Rent payments

18. 15
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.

19. 16
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.

20. 17
Ways to Calculate Cash
Flow
Direct Method
The direct method adds up all of the cash payments
and receipts, including cash paid to suppliers, cash
receipts from customers, and cash paid out in
salaries. This method of CFS is easier for very small
businesses that use the cash basis accounting
method.
Indirect Method
Cash flow is calculated by adjusting net income by
adding or subtracting differences resulting from non-
cash transactions. Non-cash items show up in the
changes to a company’s assets and liabilities on the
balance sheet from one period to the next.

21. Thank you!