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Basic Financial Statements

Basic Financial Statements. Marketing I. Balance Sheet. Balance Sheet : reports company’s assets, liabilities, and owners equity Assets : anything of monetary value Liabilities : amounts owed by a business Equity : net worth. Assets, Liabilities, Equity. Assets :

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Basic Financial Statements

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  1. Basic Financial Statements Marketing I

  2. Balance Sheet • Balance Sheet: reports company’s assets, liabilities, and owners equity • Assets: anything of monetary value • Liabilities: amounts owed by a business • Equity: net worth

  3. Assets, Liabilities, Equity • Assets: • Current assets are cash and anything of value that can be converted into cash in a year • Example: cash in the bank, accounts receivable (money owed to you by customers), inventory • Liabilities: • Current liabilities are the debts the business must pay during the upcoming business year • Example: accounts payable (money owed to suppliers), notes payable (money owed to bank), taxes payable, money owed to employees for salaries • Equity: • Assets – Liabilities = Net Worth (Equity)

  4. Income Statement • Income Statement: business's profit and loss over a given period of time • Include income from: • Sales revenue • Investments • Costs • Expenses

  5. Profit v. Loss • Profit & Loss Statement: reflect the ongoing operations of a firm • Profitable company generates more income than it pays out for goods and expenses • Company loss = costs and expenses exceed all revenue

  6. Company Net Worth • Net Worth: difference between assets and liabilities • Net Worth = assets – debts • Stockholder’ Equity is corporation net worth • Owner’s Equity is sole proprietorship net worth

  7. Small Business Administration • Small Business Administration: role to support business and encourage Free Enterprise System • Provides counseling and educational materials to prospective business owners

  8. Class Activity • What is the difference between an asset and a liability? • How can a company determine if it has made a profit or incurred a loss? • How does a company determine its net worth? • What information can be seen on an income statement? On a balance sheet? Why is this information important? • What might happen if an entrepreneur did not include financial documents in a business plan? • How are a business's one-time start-up costs different from its continuing costs? • How does the Small Business Administration (SBA) help businesses plan their financial needs?

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