Accounting Fundamentals Accounting Fundamentals
Structure of Financial StatementsStructure of Financial Statements
Agribusiness FinanceLESE 306 Fall 2009
Topic CoverageTopic Coverage1. Consolidated balance sheet2. Consolidated income statement3. Consolidated cash flow statement4. Monthly cash flow statement and LOC needs5. Debt repayment capacity statement6. Linkages between financial statements7. Introduction to financial statement analysis
Basic Structure of the Basic Structure of the Balance SheetBalance Sheet
Assets: Liabilities and Net Worth:
Current assets Current liabilities
plus Long term assets plus Long term liabilities
plus Net worth
equals Total assets equals Total liabilities and net worth
Assets: Liabilities and Net Worth:
Current assets Current liabilities
plus Long term assets plus Long term liabilities
plus Net worth
equals Total assets equals Total liabilities and net worth
Often referred to as equity
Often referred to as equity
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Basic Structure Basic Structure of Income Statementof Income Statement
Cash receipts from product salesMinus Operating and interest expensesEquals Net cash income from operationsPlus Gain (loss) on sale of long term assetsPlus Cash subsidies receivedLess Depreciation allowancesEquals Income (loss) before taxesMinus Provision for income taxesEquals Net income
Cash receipts from product salesMinus Operating and interest expensesEquals Net cash income from operationsPlus Gain (loss) on sale of long term assetsPlus Cash subsidies receivedLess Depreciation allowancesEquals Income (loss) before taxesMinus Provision for income taxesEquals Net income
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Basic Structure of Basic Structure of Cash Flow StatementCash Flow Statement
Cash available (including cash balance)Minus Cash requiredEquals Cash available less cash requiredPlus Available savings withdrawalsEquals Cash positionPlus Net borrowingMinus Other uses of cashMinus Withdrawals of cash to savingsEquals Ending cash balance
Cash available (including cash balance)Minus Cash requiredEquals Cash available less cash requiredPlus Available savings withdrawalsEquals Cash positionPlus Net borrowingMinus Other uses of cashMinus Withdrawals of cash to savingsEquals Ending cash balance
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Statement LinkagesStatement Linkages
Data from cash flow statement to income
statement:
1. Cash receipts from operations
2. Cash operating expenses
3. All other cash items (e.g., interest payments)
Cash flowstatement
Incomestatement
Balance Sheet
Statement LinkagesStatement Linkages
Data from cash flow statement to balance sheet:
1. Ending cash balance
2. Loan balances (current liability portion vs. remaining balance outstanding)
3. Asset adjustments if capital expenditures are made
4. Additions and withdrawals from savings
Cash flowstatement
Incomestatement
Balance Sheet
2009 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2009 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/09Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2009 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2009 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/09Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2009 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2009 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/09Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules