17 April 2022 22:19

BALANCE SHEET
Assets, Liabilities & Shareholder's Equity
Balance Sheet Account- Permanent Account
1. Cost- Immediate Benefit- Recorded in Income Statement as expense
2. Cost- Future Economic Benefit- Recorded as an asset- When utilized and so future benefit left- transferred
from asset in balance sheet to expense in income statement

INCOME STATEMENT
Income Statement- Revenue and Expenses
Revenue= top-line=sales
Net Income (Profits/Earnings)= Revenue-Expenses
Operating Expenses: COGS and SG&A
COGS- Amount paid to purchase or manufacture the goods that is sold
Gross Profit= Revenue- COGS= Profit available to cover all the expenses
SG&A expenses= Overheads= Salaries/Marketing costs/Operating costs/HR/IT costs= all expenses the company
incurs other than the cost of purchasing or manufacturing inventory
Relative Profitability=Net Income as a percentage of sales
Retained Earnings= Earned Capital/Reinvested capital
Change in RE= Beginning RE +Net Income for the period-Dividends for the period

STATEMENT OF CASH FLOW

Reports change in a company's cash balance over a period of time

RETURN ON ASSETS= Net Income on assets/Average total assets for that period
1. Profitability relates profit to sales= Profit Margin= Net Income (profit after tax) earned on each sales dollar
2. Productivity relates sales to assets= Asset Turnover= Sales generated by each dollar of asset

Average assets= (beginning year assets + ending year assets)/2

RETURN ON EQUITY
1. ROE= Net Income/Average Shareholder's Equity

PORTER'S FIVE FORCES:

1. Industry Competition
2. Bargaining power of buyers
3. Bargaining power of suppliers
4. Threat of substitution
5. Threat of entry

FADM Module 1 Page 1