Post on 08-Oct-2015
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Essential guide to finance
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Gain an overview of basic financial statements
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In this essential guide to finance, you can learn all about:
1. Balance sheet
2. Income statements
3. Cash flow statement
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Balance sheet equation
E + L = Aor
E = A - L
The balance sheet shows the financial position of an organization at a particular time
(a) Assets Things that you own e.g. cash at bank, motor vehicles, houses etc. *also includes things like account receivable/
debtors (money owed to you) and inventory (stock)
(b) Liabilities Something that you owe e.g. debts, money you owe to the bank, tax office
etc. *includes money you owe to employees and
suppliers
(c) Equity Difference between the assets and liabilities
i.e. your net wealth *one side should always equal the other
Liabilities Assets
Equity
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(d) Sample balance sheet
Total current assets 1,175,244 1,009,301
Total non-current assets 1,233,906 1,076,909
Total assets 2,409,150 2,086,210
Total current liabilities 686,725 640,847
Total non-current liabilities 415,579 369,186
Total liabilities 1,102,304 1,010,033
Net assets 1,306,846 1,076,177
Total shareholders equity 1,306,846 1,076,177
*Net assets = Total assets + Total liabilities = Net assets = Total shareholders equity
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e) Balance sheet equation
What you own What you owe = What you are worth
Assets Liabilities = Equity
A L = Contributions + Retained Profits + Reserves
A L = SC + RP + Res
A L = SC + Opening RP + Profits this year Dividends + Res
A L = SC + Opening RP + Revenue Expenses Dividends + Res
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Income statement
(a) The income statement refers to what has happened during the past to get you to your current position. It brings you to the balance sheet you had previously to the balance sheet that reflects on your current status.
Revenues sales, interest revenue, rent *most of these revenues associated with assets e.g. The rent you get for being the landlord
Expenses electricity, wages, depreciation *many different types of expenses
Current Position is what you achieve with this information
Revenues Expenses = Current Position
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(b) Sample income statement
2012($)
2011($)
Sales revenue 3,399,504 3,113,819
Cost of sales (-) 2,124,601 1,965,994
Gross profit 1,274,903 1,147,825
Other operating income 17,839 12,265
Selling expenses (-) 498,378 449,422
Administration expenses (-) 427,003 382,254
Profit of disposal of investments and property 26,814 184,722
Profit from operations 394,175 513,136
Finance costs (-) 64,859 67,610
Profit before income tax 329,316 445,526
Income tax expenses 117,612 105,142
Profit after income tax 211,704 340,384
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(c) Sample income statement analysis
The follow information is an example taken from a sample income statement from Shobenlu Retailers PTE LTD
Example, the statement is titled as: SHOBENLU RETAILERS PTE LTD INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012
It is important to take into account the income statement is FOR THE YEAR, rather than a set point of time. A set point of time is what the balance sheet shows.
Also significant to know that income statements can take many other forms and this is just a sample. Expenses and Profit can differ greatly
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Cash flow statementThe cash flow statement simply shows cash in and cash outThere are three forms of cash flow:
(a) Operating cash flows (Cash Out)
Cash In
> Receipts from customers> Dividends received> Interest received
Cash Out
> Payments to suppliers and employees> Income tax paid> Interest paid
(b) Investing cash flows (Cash In)
Cash In
> Proceeds from property, plant and equipment> Proceeds from sale of investments> Proceeds from sale of companies and businesses
Cash Out
> Payments property, plant and equipment> Payments for investments> Acquisitions of companies and businesses
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(c) Financing cash flows
Cash In
> Proceeds from new borrowings> Proceed from share issues
Cash Out
> Payments on borrowings> Return/buy-back of shares> Dividends paid
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Get a free sample of the 12 Hour MBA in Finance training course now!
Find out what the course is all about..
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Introducing David
David runs the 3 Day MBA in Finance and 12 hour MBA and has worked with Terrapinn providing a number of financial training courses. He has a background of working in chartered accountancy; he had worked for many years in PricewaterhouseCoopers (in Corporate Finance), IBM as a Financial Controller, and Macquarie Bank.
David has always had a passion for training. After a few years, it became clear to him that he had the self proclaimed training bug and was getting much more satisfaction out of training and explaining accounting and finance than he was gaining from actually doing accounting or finance. He left Macquarie Bank in 2002 and since that time has been training and consulting for a variety of organisation including Terrapinn, as well as some large, multinational law firms.
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I thought you might be interested in reading what some past delegates have to say about our 3 Day MBA in Finance.
Read on for their comments on the course and the trainer.
The trainer is patient to explain his knowledge.Group HR Manager, Amazon Papyrus Chemicals Hong Kong Limited
Excellent trainer, very knowledgeable. Clear explanation of financial concepts in a fun interactive manner.Vice President, Parkview Group
David is crystal clear in his definitions and explanations of the way of financial concepts.Past attendee, DSM Nutritional Product Asia Pacific Pte Ltd
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Wondering if you know all there is to know about Finance
Would you like to learn more about accruals and prepayments, inventory, finance instruments and much more?
Why not try our 12 Hour MBA in Finance.
The 12 Hour MBA in Finance will take you through the modules covered in this E-book in much more depth. Mr Silipo will walk you through the fundamentals of finance in an easy to manage online training course.
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Wed love to meet you tooWe also run a 3 Day MBA in Finance in various locations across the globe.
Alternatively, we can come to you. We can tailor the course to your needs and deliver the course for you and your team.
For more information contact Lynn Chen on +65 6322 2337. Or visit our website.
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