Chapter 2 Basic Financial Statements

1
Chapter 2Basic Financial Statements
2
General Principles to Follow

• Principle 1 Make Excel do as much of the work as
  possible.
• Principle 2 Format the worksheet so that it is
  easy to understand.

3
Types of Financial Statements

• Income Statement
• Balance Sheet
• Statement of Cash Flows

4
Income Statement

• Summarizes the results of the firms operations
  over a period of time
• Revenues
• Cost of Goods Sold (COGS)
• Operating Expenses
• EBIT
• Taxes
• Net Income

5
Balance Sheet

• Describes the assets, liabilities, and equity of
  the firm at a specific point in time
• Assets
• Liabilities
• Equity

6
Statement of Cash Flows

• Outlines the sources of the firms cash inflows
  and shows where the cash outflows went

7
Cash Flows

• Cash Flows from Operations describes cash flows
  generated by the firm in the ordinary course of
  conducting its business
• Cash Flows from Investing describes cash flows
  due to the firm altering its mix of fixed assets
• Cash Flows from Financing describes the cash
  flows that are generated in the course of
  financing the firm

8
Determining Change in Cash Balance

• Beginning Cash Balance
• Cash inflows (sources)
• - Cash outflows (uses)
• ------------------------------------
• Ending Cash Balance