FINANCIAL

STATEMNTS
3 Major Financial Statements Reports
1. Balance sheets
Provides an overview of a company’s
assets, liabilities, and shareholder’s
equity as a snapshop in time.
Breakdown of the items in a balance sheet:
a) Assets
 Cash and cash equivalents- are liquids assets
 Account receivable- are the amount of money owed to the company by its customers for the sale
of its product and service.
 Inventory- is the goods of company on hand it intends to sell as a course of business.
 Prepaid Expenses- are costs that have been pain in advance of when they are due.
 Property, plant, and equipment- are capital assets owned by a company for its long term benefit.
 Investments- are assets held for speculative future growth.
 Trademarks, patents, goodwill, and other intangible assets- cant be physically be touched but
have future economics for the company.
b) Liabilities
 Account payable- are the bills due as part of the normal course of
operations of a business.
 Wages payable- are payments due to staff for time worked.
 Notes payable- are recorded debt instruments that record official
debt agreement including the payment schedule and amount.
 Dividends payable- are dividends that have been declared to be
awarded to shareholders but have not yet been paid.
 Long-term dept- include variety of obligations including sinking bond
funds, mortgages, or others loans that are due in their entirety in
longer than one year.
c) Shareholders Equity
 Company’s total assets minus its total liabilities.
 Represents the mount of money that would be returned to
shareholders if all of the assets were liquidated and all of the
company’s debt was paid off.
 Retained earnings- part of the shareholders equity.
2. Income Statement

Covers range of time, which is a year

for annual financial statements and a
quarter for quarterly financial
statements.
3. Cash Flow Statement
Measures how well a company generates cash to pay its debt
obligations, fund its operating expenses, and fund investments. The
CFS complements the balance sheet and income statements.
 3 Components of CFS
1. Operating Activities- it includes any sources and uses of cash from
running the business and selling its products or services.
2. Investing Activities- it includes any sources and uses of cash from a
company’s investments in the long-term future of the company.
3. Financial Activities- it includes the sources of cash paid to
sharholders.
4.Free Cash Flow and Other Valuation
Statements
• Companies and analysts also use free cash flow statements and other
valuation statements to analyze the value of a company.
• Free cash flow statements arrive at a net present value by discounting
the free cash flow that a company is estimated to generate over time.
• FCF tells you how much cash a company has left over after paying its operating expenses and
maintaining its capital eeexpenditures
• Valuation statements determinies the fair value of an asset, investment, or firm.
Financial Performance
• These are maintained by companies daily and used internally for
business management

• The financial performance tells investors about the general well-being

of a firm. It's a snapshot of its economic health and the job its
management is doing.
• A key document in reporting corporate financial performance is Form
10-K, which all public companies are required to publish annually.
• Included in the 10K are three financial statements: the balance sheet,
the income statement, and the cash flow statement.