Financial information презентация

Learning outcomes
Income statement
Why businesses need to keep accounting records such as income statements
Why profits are always equal to cash
Why profits are important
The differences between gross, net and retained profit
What does the income statement contain
Foundation Year Program
Introduction to Business 2018-19

Why to record
Foundation Year Program
Introduction to Business 2018-19

Why profit is important?
Foundation Year Program
Introduction to Business 2018-19

Income statement
Foundation Year Program
Introduction to Business 2018-19
Is it higher or lower than last year?
If lower, why is profit falling?
Is it higher or lower than other similar businesses? Industrywide benchmark?
If lower, what can we do to become as profitable as others, achieving the benchmark?
If the business is making a loss, managers will want to ask themselves:
Is this short term- or long-term problem?
Are other similar businesses also making losses?
What decisions can we take to turn losses into profits?

Income statement
Foundation Year Program
Introduction to Business 2018-19
Gross profit does not make any allowance for overhead (fixed) costs or expenses
Costs of goods sold is not necessarily the same as the total value of goods bought by the business
COGS: materials, manufacturing and direct labor

Income statement
Foundation Year Program
Introduction to Business 2018-19

Foundation Year Program
Introduction to Business 2018-19
Net profit

Foundation Year Program
Introduction to Business 2018-19
COGS: materials, manufacturing and direct labor

Net Retained profit
Foundation Year Program
Introduction to Business 2018-19

Income statement
Foundation Year Program
Introduction to Business 2018-19

Learning outcomes – Balance Sheet
The main elements of a balance sheet
The main classification of assets and liabilities
How to use examples to illustrate these classification show to interpret simple balance sheets and make inferences from them
Foundation Year Program
Introduction to Business 2018-19

The concept of Equity
Foundation Year Program
Introduction to Business 2018-19

Balance sheet (BS)
Income statement, not much information about the worth of the business. Balance sheet record the value or worth of the business at one moment.
Assets: items of value owned by the business.
Fixed assets: land, building, vehicles, equipment for more than year. Except land all depreciate
Intangible assets: do not exist physically, brand, copy rights.
Current assets: cash, inventories (stock), account receivables (customers who owe money to the business) for short period.
Foundation Year Program
Introduction to Business 2018-19

Balance sheet (BS)
Liabilities: are the items owed by the business.
Non-current liabilities- long term borrowing (do not have to be paid within one year.
Current liabilities-amount owed by the business to be paid within one year (bank overdraft, supplier or creditor)
Foundation Year Program
Introduction to Business 2018-19

Foundation Year Program
Introduction to Business 2018-19

Analysis of account
Learning outcome
Interpreting financial statement
Profitability rations
Concept of liquidity
Use ratios to make decisions.
Foundation Year Program
Introduction to Business 2018-19

Analysis of account
Observe the data to know the performance and financial strength of the business
Business performing better than last year
Business performing better than other businesses
Profitability ratios used to measure profitability and liquidity of the business.
Liquidity (ability of payback short term debts)
Foundation Year Program
Introduction to Business 2018-19

Analysis of account
Foundation Year Program
Introduction to Business 2018-19

Analysis of account
Foundation Year Program
Introduction to Business 2018-19
More robust metrics as it excludes illiquid inventory, and indicates whether a firm has sufficient short-term assets to cover immediate liabilities

Ratios
Foundation Year Program
Introduction to Business 2018-19