Business 201 - Chapter 5 Flashcards
(24 cards)
Three main financial statements
Income Statement
Balance Sheet
Statement of Cash Flow
Income statements responds to the question of…?
Are we earning a profit
Income statement identifies profit by …?
Revenue - expenses
Income statements are a good barometer of …?
Efficiency and Effectiveness
Sales Revenue - Product Costs =
Gross Profit Margin
Gross Profit Margin - general operating expenses =
Earnings before interest and taxes
Earnings before interest and taxes - interest payments =
Earnings before taxes
Earnings before taxes - taxes =
net profit (or loss)
Balance sheet mainly displays
resources and financial obligations
Assets =
Liabilites + Owners Equity
Balance sheet is a snapshot of
Position at a specific point in time
Balance sheet is a good barometer of
Capacity and liquidity
Assets are
Resources at disposal that can be used to generate business activity
Current assets are
liquid
cash
easily converted to cash
Non current assets are
fixed capital assets equipment land non tangible assets
Liabilites
debts or financial obligations
Short term liabilites
pay within the current year
line of credit
accounts payable
Long term liabilites
extend into future loans mortgages bonds leases
Owners equity
value of capital received from the owners, includes retained earnings
Statement of cash flows
Shows total movement of cash in and out of a business
Statement of cashflows is the best source for
current and projected liquidity
Statement of cashflows summarizes
sources and uses of an organizations cash
Designated Restricted Assets
assets earmarked for a specific purpose within a NFP
NFP true surplus funds avaliable =
cash and near cash assets - designated restricted cash and near cash assets
