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FINANCIAL STATEMENTS
- Balance Sheet
A balance sheet is a list of Assets, Liabilities and Net Worth
of a business on a specific date in time.
A well known formula to determine Net Worth is:
Assets - Liabilities = Net Worth.
Therefore if your business has assets of $150 million and liabilities of
$75 million,
your net worth would be: $150 - $75 = $75 million.
EXAMPLE CO.
Balance Sheet
AS OF 12/31/95
|
ASSETS
|
|
LIABILITIES
|
|
| Current Assets |
100 |
Curremt Liabilities |
50 |
| Fixed Assets |
50 |
Long Term
Liabilities |
25 |
|
|
Total Liabilities |
75 |
|
|
Net Worth |
75 |
| |
|
|
|
| TOTAL ASSETS |
150 |
TOTAL LIAB & N/W |
150 |
|
Description
- Current Assets: Assets that will be converted to cash within 1 year. These are
normally assets that are used in the ordinary course of business, like accounts receivable
and inventory.
- Fixed Assets: Assets considered as long term assets. Assets not used in the
ordinary course course of business like land, building, equipment, furniture, vehicles,
etc.
- Current Liabilities: Debts that are considered short term in nature; usually
bills that must be paid within 1 year.
- Long Term Liabilities: Debts that are due for payment more than 1 year from the
statement's date.
- Net Worth or Equity: Assets - liabilities = net worth.
- Income Statement (aka Profit & Loss, P & L Statement, etc)
The income statement is a list of a company's income, expenses
and profit or loss over a specific period of time.
There are many types of Income statements, depending upon the type of business your are
in, but generally, one can usually find the following major categories when
looking at an income statement.
Example Co.
Income Statement
For Period 1/1/95 - 12/31/95
| Sales |
250,000 |
| |
|
| Cost of Goods Sold |
-180,000 |
| |
|
| Gross Profit |
70,000 |
| |
|
| Expenses |
-40,000 |
| |
|
| Profit (Loss) |
$30,000 |
| |
|
|
|
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