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Understanding a Financial Statement

Understanding a Financial Statement. Horticulture 2 Essential Standard 2.02. A . T o t a l a s s e ts = c u rr e n t a ss et s + n on - c u rr e n t a ss e ts.

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Understanding a Financial Statement

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  1. Understanding a Financial Statement Horticulture 2 Essential Standard 2.02

  2. A.Total assets= currentassets+ non-currentassets. 1. Current assets- items thatcanquicklybeconvertedtocashorthatwill be soldwithin12months. Examples- cashonhand,checkingandsavings accounts, stocks,bondsandcashinvalueoflifeinsurancemoneyothersoweyou, currentnon-depreciableinventory. 2. Non-currentassets- itemsthathaveauseful lifeofmorethanoneyear andareusedinthebusiness. Examples- non-current,non-depreciableinventory,land.

  3. B.Total liabilities= currentliabilities(debts) + non-currentliabilities(debts). 1. Currentliabilities- accountsandnotespayable,thisyear’spartof non-currentliabilities. Non-currentliabilities- mortgages andotherdebtsnot due this year.

  4. C.Networthor owner’sequity= total assetsminustotal liabilities.

  5. D.Debt-to-EquityRatio- ameasure ofacompanyor individualsnetworthcompared totheliabilities. • Providesanindicator of thedebtandequityacompanyis using tofinanceassets. • FormulausedtocalculateDebt-to-EquityRatiois • Debt-to-EquityRatio = total liabilities/networth.

  6. E.Value- monetaryworth.

  7. F.Inventory- anitemizedlistofthings ownedbyabusinesswiththebeginningvalueanddepreciatedvalue. Non-depreciable- itemsthatwill beusedupor sold withinayear. Example:feed,supplies, etc. 2. Depreciable- itemsthathaveauseful lifeofmorethanoneyear andlose valuebecause ofage,wear or becomingout-of-datebecauseof technologyadvancements. 3. LandisNOTdepreciableproperty.

  8. 2.02.01RECORDSWORKSHEET Instructions: Statewhether each itemisacurrent liability,non-current liability, current asset,ornon-current asset.Givethevalueof that item and then calculate thetotalvalue.Onceyou haveallthevalues,calculatetotalassets,total liabilities,and networth.

  9. Balance Sheet

  10. Let’s Check Our Work!!!

  11. Balance Sheet

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