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REPORT IN BUSINESS FINANCE Group:2 Review of Financial Statement Preparation,Analysis,and Interpretation. Learning Competences 2.1 Prepare Financial Statements. 2.2 Define The Measurement Levels, Namely, Liquidy, Solvency, Stability, And Profitability. 2.3 Perform Vertical and Horizontal Analyses Of Financial Satatements Of A Single Proprietorship. 2.4 Compute, Analyze, and Interpret Financial Ratios Such As Current Ratio, Working Capital ,Gross Profit Ratio, Net Profit Ratio, Receivable Turnover, Inventory Turn Over, Debtto-Equity Ratio, And The Like. PREPARE FINANCIAL STATEMENTS? 2.1 Prepare Financial Statements. What are financial statements? Financial statements refer to a collection of reports about an organization’s Financial result, Fiancial condition, and Cash Flows. Financial statements (or financial report ) is a formal record of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include basic financial statements, accompanied by a management discussion and analysis What Comprises A Complete Set Of Financial Statements? Balance sheet – which reports a nd entity’s financial condition. A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time. Income statement – which reports and entity’s financial result . An income statement or statement of comprehensive income, statement of revenue & expense, P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period. Statement of cash flows – which reports an entity’s cash flow . cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. Statement of changes in equity – which reports and entity’s movement of equity. Statement of Changes in Equity, often referred to as Statement of Retained Earnings in U.S. GAAP, details the change in owners' equity over an accounting period by presenting the movement in reserves comprising the shareholders' equity. A Statement of changes in equity or equity statement or statement of retained earnings, reports on the changes in equity of the company during the stated period. Notes to financial statement or supplementary notes – which serves as supporting details for the above financial statements. Also referred to as footnotes. These provide additional information pertaining to a company's operations and financial position and are considered to be an integral part of the financial statements. The notes are required by the full disclosure principle. What are the elements of a balance sheet? The three major elementsof the balance sheet are assets , liabilities , and owner’s equity . ASSETS: The assets section shows items your company owns that have tangible value. It includes current assets, along with property and equipment, investments and intangible assets. The current assets section is compared to current liabilities to figure out your basic liquidity, or ability to pay off short-term debt. LIABILITIES: The liabilities section is simply divided into current and long-term liabilities. Current liabilities are debts due within the next 12 months. Notes payable and accounts payable are common short-term debt accounts. OWNER’S EQUITY: Owners' equity is mathematically determined to be the difference between your assets and liabilities. In essence, whatever you have left if you were to sell all of your assets and pay off debt is the value of the company at the present time. Equity actually includes a variety of accounts, but most commonly it refers to paid-in capital and retained earnings. What comprises an income statements? The income statement consists of revenues and expenses along with the resulting net income or loss over a period of time due to earning activities. An income statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period. 1.2 Define the measurement levels, namely, liquidity, solvency, stability, and profitability Differentiate solvency from profitability
