:Classification : Highly Confidential

Name: Mahmoud Shebl

PID: 6315619

1. What is the purpose of a Balance Sheet?

A balance sheet serves as a comprehensive overview of a business's financial situation at a

particular moment in time. It lists the company's assets, liabilities, and equity—the amount of
money invested by shareholders. Stakeholders such as creditors, investors, and management can
evaluate the company's liquidity and financial stability with the use of this financial statement.
The balance sheet facilitates the evaluation of a company's capacity to satisfy both short- and
long-term financial obligations by providing a clear image of its assets and liabilities. This helps
decision-makers make well-informed choices about operating strategies, credit, and investments.

2. What are the typical categories and sub-categories for a balance sheet?

A balance sheet typically has three main categories: assets, liabilities, and shareholders' equity,
each of which has several subcategories. There are two categories of assets: current assets and
non-current assets. Cash and accounts receivable are examples of current assets, as are
inventories and other assets that are anticipated to be depleted or turned into cash within a year.
Long-term investments, property, plant, and equipment (PPE), intangible assets (such patents
and trademarks), and other assets with long-term worth are all considered non-current assets.
There are two types of liabilities: current obligations and long-term liabilities. Current liabilities
are debts that the business must pay off in less than a year, including accumulated costs, short-
term debt, and accounts payable. Pension commitments, long-term debt, and deferred tax
liabilities are examples of long-term liabilities. Typical components of shareholders' equity are
common stock, retained profits, and extra paid-in capital, which stands for the owners'
entitlements upon the settlement of all obligations. All these areas together offer a thorough
picture of the structure and health of a company's finances.

3. What is the purpose of an Income Statement?

An income statement, sometimes referred to as a profit and loss statement, serves as a

comprehensive report of the financial performance of a business over a given time frame. It
provides an overview of the business's earnings and losses as well as sales and costs, providing
information on how profitable and efficient its operations are. The income statement provides
information that helps creditors, investors, and management understand the company's capacity
for profit by describing how revenue is converted into net income. Planning future business
plans, evaluating a company's historical success, and comparing it to rivals all depend on this
financial statement. Better financial forecasting and decision-making are made possible by its
assistance in spotting trends in income and spending.

4. What are the typical categories and sub-categories for an income statement?
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Name: Mahmoud Shebl
PID: 6315619

An income statement typically has three main categories: revenues, costs, and net income, each
of which has several subcategories.

All money received by the firm from its main operations, including sales and service fees, is
referred to as revenues.

The direct costs, including labor and material costs, associated with producing the items the firm
sells are referred to as Cost of items Sold (COGS).

By deducting COGS from total sales, gross profit is computed, which indicates how efficiently
the business produces its goods or services.

expenditures incurred in the regular course of a firm, such as rent, utilities, wages, marketing
expenditures, and depreciation, are included in operating expenses.

By deducting operational expenditures from gross profit, operating income (also known as
operating profit) is obtained, which represents the profit from primary company operations.

Gains or losses from asset sales, interest income, interest costs, and other non-operating items are
all included in the total income and expenses.

The computation of Income Before Taxes involves deducting other expenditures from
operational income and adding other income. The company's income tax costs are included in
taxes.

The ultimate indicator of profitability, known as net income (or net profit), is determined by
deducting taxes from income prior to taxes. After deducting all costs and taxes from total
income, this amount shows the company's profit.

5. What is the purpose for the Statement of Cash Flows?

The statement of cash flows is intended to give a thorough examination of the cash inflows and
outflows for a certain time for a business. Cash transactions are divided into three primary
categories in this financial statement: financing, investing, and operating. Cash flows from the
company's primary business activities, such as sales revenue and cost payments, are referred to
as operating activities. Cash flows associated with the acquisition and disposal of long-term
assets, including real estate, machinery, and investments, are included in investing activities. The
cash flows from dealings with the company's creditors and owners, such as the issuance or
repayment of debt and stock, are covered by financing operations. The statement of cash flows
provides a clear picture of how cash is earned and consumed, which aids stakeholders in
evaluating the company's liquidity, financial stability, and general financial well-being. It also
helps assess how well the business can manage its financial requirements, create future cash
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Name: Mahmoud Shebl
PID: 6315619

flow, and continue operating. Making educated choices on loans, investments, and strategic
planning requires understanding this statement.