Financial Statements Overview 205 Corporate Finance

Summary

Cette présentation sur la finance d'entreprise aborde les déclarations financières comme outil principal pour évaluer une entreprise. Elle explique comment les investisseurs utilisent ces déclarations pour déterminer la valeur actuelle et le potentiel de croissance future. Les quatre types de déclarations financières - le bilan, l'état de revenus, le rapport des profits retenus et le flux de trésorerie - sont décrits, soulignant leur rôle dans l'évaluation de la valeur et la performance d'une entreprise.

Takeaways

• 📈 Les déclarations financières sont essentielles pour évaluer la valeur d'une entreprise.
• 💼 Les investisseurs utilisent les déclarations financières pour déterminer la valeur actuelle et le potentiel de croissance d'une entreprise.
• 🔍 La feuille de balance représente la valeur d'une entreprise à un moment donné, en établissant l'équation comptable des actifs égaux aux passifs plus le capital.
• 📊 Le revenu net est le résultat de la déclaration de revenu, qui reflète les performances passées et peut être utilisé pour prédire l'avenir.
• 🔗 La déclaration de réticences retenues lie la feuille de balance et la déclaration de revenu, en montrant comment le revenu net influence la valeur du capital sur la balance.
• 💹 La déclaration de cash flow analyse les flux de trésorerie au cours d'une période, ce qui est différent de la valeur enregistreuse qui est mesurée sur la balance.
• 🚀 Les déclarations financières peuvent être présentées de manière verticale pour une meilleure lisibilité et compréhension.
• 💡 Le double-entry accounting system garantit que les actifs sont égaux aux passifs plus le capital, reflétant ainsi l'équilibre financier de l'entreprise.
• 🌐 La valeur du marché d'une entreprise dépasse sa valeur comptable, en tenant compte également de son potentiel de收益.
• 📚 Il est important de comprendre la relation entre les différentes déclarations financières pour évaluer correctement la santé et la valeur d'une entreprise.

Q & A

Quels sont les documents financiers principaux abordés dans cette présentation ?

Les documents financiers principaux abordés sont le bilan, l'état de revenus, le rapport de réserve d'earnings et le déclaration de flux de trésorerie.

Pourquoi les états financiers sont-ils importants pour les investisseurs ?

Les investisseurs utilisent les états financiers pour évaluer la valeur actuelle de l'entreprise et son potentiel de génération de revenus à l'avenir.

Quelle est la fonction du bilan dans l'évaluation d'une entreprise ?

Le bilan fournit une image de la valeur actuelle de l'entreprise en mesurant les actifs, les passifs et l'équité, ce qui reflète la valeur en ce point précis du temps.

Comment le rapport de réserve d'earnings relie-t-il le bilan et l'état de revenus ?

Le rapport de réserve d'earnings relie le bilan et l'état de revenus en montrant comment les bénéfices et les dividendes affectent l'équité sur une période donnée.

Quelle est la différence entre la valeur comptable et la valeur de marché d'une entreprise ?

La valeur comptable est basée sur les actifs et les passifs enregistrés, tandis que la valeur de marché est déterminée par les investisseurs en fonction des performances passées et les perspectives futures de l'entreprise.

Pourquoi le déclaration de flux de trésorerie est-il différent de l'état de revenus ?

Le déclaration de flux de trésorerie se concentre sur les flux de trésorerie réels au cours d'une période, tandis que l'état de revenus utilise une base d'accrual pour mesurer le revenu et les dépenses.

Quels sont les trois types de flux de trésorerie mentionnés dans le script ?

Les trois types de flux de trésorerie sont les flux de trésorerie provenant des activités opérationnelles, des activités d'investissement et des activités de financement.

Comment le flux de trésorerie des activités opérationnelles est-il lié à l'état de revenus ?

Le flux de trésorerie des activités opérationnelles est lié à l'état de revenus en utilisant la méthode indirecte pour ajuster le revenu net d'après les principes d'accrual au revenu net sur une base de trésorerie.

Quels sont les éléments clés à considérer lors de l'évaluation d'une entreprise à partir de son état de revenus ?

Les éléments clés incluent le revenu, les dépenses, le revenu net, ainsi que l'impact des actions préférées et ordinaires sur les bénéfices attribués aux actionnaires ordinaires.

Pourquoi est-il important de comprendre la relation entre les différents états financiers ?

Comprendre la relation entre les différents états financiers permet une évaluation plus précise de la santé financière et des performances d'une entreprise, ce qui est crucial pour les investisseurs et les gestionnaires.

Outlines

00:00

📈 Aperçu des déclarations financières

Cette présentation couvre un aperçu des déclarations financières, qui sont essentielles pour évaluer une entreprise. Les déclarations sont générées par l'entreprise et utilisées par les investisseurs pour déterminer la valeur du marché de l'entreprise. Les investisseurs cherchent à comprendre la valeur actuelle de l'entreprise et son potentiel de croissance future. Les deux composantes clés des déclarations financières sont le bilan, qui indique la valeur à un moment donné, et les déclarations de performance, comme le état de revenu, qui montrent la capacité de l'entreprise à générer des revenus et à grandir dans le futur.

05:01

🔍 Comprendre le Bilan et l'État de Revenu

Le bilan représente la valeur actuelle de l'entreprise, en déterminant la différence entre les actifs et les passifs. Les actifs sont ce que l'entreprise possède, tandis que les passifs sont les dettes. L'équité, ou la valeur enregistrée dans les livres de l'entreprise, est le résultat de cette différence. L'état de revenu, en revanche, évalue la performance de l'entreprise sur une période donnée, en soustrayant les dépenses des revenus pour obtenir le revenu net. Ces deux documents financiers sont fondamentaux pour les investisseurs qui évaluent à la fois la valeur actuelle et le potentiel de croissance d'une entreprise.

10:01

🔗 Liens entre les Déclarations Financières

Le bilan et l'état de revenu sont reliés par le biais de l'état de réserve d'earnings, qui sert de document de liaison entre les deux. L'état de réserve d'earnings démontre comment les profits générés par l'entreprise sur une période donnée affectent la valeur du bilan à un moment donné. Il inclut les profits initiaux, ajoute les bénéfices nets de l'exercice et déduit les dividendes payées aux actionnaires. De plus, l'analyse des flux de trésorerie est essentielle pour comprendre le mouvement de trésorerie de l'entreprise sur une période donnée, ce qui est différent de l'évaluation des revenus et des dépenses sur une base d'accrual.

15:02

💹 Performance et Flux de Trésorerie

L'état de revenu reflète la performance de l'entreprise sur une période, en mesurant le revenu et les dépenses pour déterminer le revenu net. Cependant, l'analyse des flux de trésorerie est également cruciale, car elle indique comment l'entreprise gère son trésorerie et si elle a suffisamment de liquidités pour soutenir ses opérations. Les flux de trésorerie sont classés en activités opérationnelles, d'investissement et de financement, offrant une perspective différente de la performance de l'entreprise basée sur les mouvements de trésorerie plutôt que sur la base d'accrual.

20:02

🌐 Système de Comptabilité à Double Entrée

Le système de comptabilité à double entrée est au cœur de la manière dont les déclarations financières sont interconnectées. Les actifs sont égaux à la somme des passifs et de l'équité, ce qui reflète la valeur de l'entreprise. L'état de réserve d'earnings relie le bilan et l'état de revenu en montrant comment les bénéfices nets affectent la valeur du bilan. L'état de flux de trésorerie, quant à lui, fournit une vue distincte en se concentrant sur les mouvements de trésorerie de l'entreprise, ce qui est essentiel pour comprendre la santé financière et la viabilité à long terme de l'entreprise.

Keywords

💡États financiers

Les états financiers sont des documents qui résument les performances et la position financière d'une entreprise. Ils sont essentiels pour les investisseurs et les gestionnaires pour évaluer la valeur et la santé financière d'une entreprise. Dans le script, les états financiers sont décrits comme l'outil principal pour valoriser une entreprise, comprenant le bilan, le compte de profits et pertes, l'état de répartition des bénéfices et le flux de trésorerie.

💡Bilan

Le bilan est un état financier qui montre la valeur nette des actifs d'une entreprise par rapport à ses dettes et son capital. Il reflète la position financière d'une entreprise à un moment donné. Dans le script, le bilan est expliqué comme représentant ce que la compagnie possède (actifs), moins ce qu'elle doit (passif), ce qui donne la valeur du capital ou l'équité.

💡Compte de profits et pertes

Le compte de profits et pertes, également connu sous le nom d'état de revenus, mesure la performance d'une entreprise sur une période donnée en mesurant ses revenus et ses dépenses. Il est lié au bilan en ce qu'il indique la performance de l'entreprise qui affecte sa valeur. Dans le script, le compte de profits et pertes est décrit comme un indicateur de la performance passée de l'entreprise, qui peut être utilisé pour prévoir son avenir.

💡État de répartition des bénéfices

L'état de répartition des bénéfices est un document financier qui montre comment les bénéfices d'une entreprise sont alloués entre les différentes parties prenantes, y compris les actions ordinaires et les actions préférées. Il relie le bilan et le compte de profits et pertes en montrant comment les bénéfices affectent la valeur du capital de l'entreprise. Dans le script, il est mentionné comme un lien entre le bilan et le compte de profits et pertes.

💡Flux de trésorerie

Le flux de trésorerie est un état financier qui enregistre tous les flux de trésorerie d'une entreprise, y compris les opérations, les investissements et les activités de financement. Il est différent du compte de profits et pertes car il se concentre sur les transactions réelles de trésorerie plutôt que sur les revenus et les dépenses comptabilisés. Dans le script, le flux de trésorerie est expliqué comme un moyen de mesurer les flux de trésorerie d'une entreprise sur une période donnée.

💡Actifs

Les actifs sont ce que possède une entreprise et peuvent être divisés en actifs circulants et non circulants. Ils sont mentionnés dans le script comme l'élément du côté droit de l'équation du bilan, représentant ce que la compagnie possède.

💡Passif

Le passif représente les dettes et les obligations d'une entreprise envers des tiers. Dans le script, le passif est expliqué comme ce que l'entreprise doit aux créanciers et autres parties.

💡Capital-actions

Le capital-actions fait référence à l'investissement des actionnaires dans une entreprise. Dans le script, il est mentionné comme une partie du capital propre ou de l'équité, qui est le résultat de la valeur nette des actifs après avoir soustrait les dettes.

💡Revenu

Le revenu est la quantité d'argent que genere une entreprise de ses opérations normales. Dans le script, le revenu est décrit comme l'un des composants clés du compte de profits et pertes, qui est soumis à des dépenses pour déterminer le revenu net.

💡Dépenses

Les dépenses sont les coûts associés à la génération de revenus pour une entreprise. Elles sont mentionnées dans le script comme un élément du compte de profits et pertes, qui est soustractif du revenu pour calculer le revenu net.

💡Croissance

La croissance fait référence à l'augmentation dans la valeur ou le volume des activités d'une entreprise sur une période de temps. Dans le script, la croissance est abordée comme un facteur clé pour les investisseurs qui évaluent la potentialité future d'une entreprise.

Highlights

Financial statements are crucial for valuing a company and are generated by the company itself.

Investors use financial statements to assess a company's current value and future growth potential.

The balance sheet represents a company's assets, liabilities, and equity at a specific point in time.

The income statement reflects a company's performance over a period, showing revenue, expenses, and net income.

The statement of retained earnings links the balance sheet and the income statement, showing the change in equity over time.

The statement of cash flows measures the flow of cash in and out of a company, distinct from the accrual basis of other statements.

The accounting equation is assets equal liabilities plus equity, forming the foundation of the balance sheet.

Assets are valued in monetary terms, reflecting what the company owns.

Liabilities represent what a company owes to third parties.

Equity indicates the residual interest in the assets of the company after deducting its liabilities.

The market does not solely base a company's valuation on book value; earning potential is also considered.

Earnings per share is a measure derived from net income and the number of outstanding shares.

The statement of retained earnings is essential for understanding how earnings affect a company's equity over time.

Dividends are payments made by a company to its shareholders, reducing the retained earnings.

Cash flows from operating activities on the cash flow statement are derived from net income on an accrual basis.

Investing activities and financing activities are also reflected in the statement of cash flows, showing how a company manages its cash.

The statement of cash flows ties out to the balance sheet, ensuring the accuracy of a company's financial reporting.

Transcripts

corporate finance powerpoint

presentation

in this presentation we will give an

overview of financial statements

get ready it's time to take your chance

with corporate finance

financial statement overview the

financial statements will be the primary

tool that will be used

to value the company the financial

statements are going to be generated

from the company and when we're thinking

about investors

in the company the investors will be

using those financial statements in

order to value

the company to determine the price the

market basically determining the price

through investors then uh creating a

value or perceived value of the company

which is based

primarily on the tool the being used

the financial statements so if you're

thinking about this from an investor

perspective if you're an investor

perspective and you want to know

about the company to see whether or not

you want to invest in it

you'll typically want to know at least

two things you can categorize two things

within your mindset you're going to say

okay what is the value of the thing i'm

buying right now

so what is its current value where do

you stand at this point in turn

time in terms of the valuation and you

want to know performance how likely are

you

able to generate revenue in the future

are you going to grow

is your valuation going to be increasing

in the future

so those are the two things we're

basically looking at where do you stand

now how likely is it that you're going

to be growing in the future and how fast

will that growth be that's the

information i need to determine

what your current value will be so you

want to break the financial statements

into those two components or we can

break the financial statements

into those two components to provide

those that information

so one is going to be the point in time

that's going to be the balance sheet

so first where do you stand as of now

so if you think about the balance sheet

that represents what the company has

their assets

minus what they owe liabilities equals

basically the equity or

book value in the company so this this

has given you a valuation

as of now as of this point in time and

you're going to say well that's great

but i'm not simply going to invest

just on or the market's not going to

value the company

simply on their balance sheet on their

assets minus the liabilities

they're not going to value the company

on the things they own minus

who you know the liabilities that they

owe to book value of the company

that's not typically going to simply be

the value of the company because

there's also earning potential is there

earning potential

in the future and so for that you need a

timing statement

now when you think about a timing

statement all you can do is look at

the past right you can look at the pass

and say how well did they do in the past

therefore how likely are they to do well

in the future if you're looking at a

runner

you could say how fast did they run the

the mile last time

how fast do you think they're going to

run it in the future time or if you're

thinking about how many miles could a

car drive

in you know an hour how how well did

they do last time

how many miles do you think they're

going to drive next time those are

timing statements to measure

to measure past performance that will be

used typically to

predict future performance when we think

about the valuation from an investment

perspective that's going to include the

income statement which is the primary

statement you want to think of with a

timing statement

that's going to be our performance

statement how well did you did

did you do last year and how likely are

you to do

that next year if you look at the last

two years or something

is there an upward trend do we think

that trend is going to be increasing

so the income is revenue minus expenses

how well did you do

how much revenue did you generate how

much expenses did you incur to do that

and the net income being the bottom line

we also have the statement of retained

earnings now the statement of

retained earnings is going to be kind of

a link between the balance sheet and the

income statement so once you get the

idea of a point in time in a time frame

you also want to get the idea of this

double entry accounting system idea in

place how do you get from the income

statement to the balance sheet

meaning the balance sheet is as of now

if you're talking about

the year end of december 31st is what

you're looking at

the balance sheet is as of december 31st

the income statement is the time frame

january to december how do you get from

the income statement to

to the balance sheet how are those

things related well we're going to need

this statement of retained earnings

to kind of link those two together so

it's kind of a timing statement

but it's going to link together the

prior point on the balance sheet to the

current point

on the balance sheet last year compared

to this year linked together

uh the income statement and possibly

dividends

then we have the statement of cash flows

another uh timing statement because

you're looking at flows of cash

meaning we're not looking at cash as of

now with the statement of cash flow

because that's what you do on the

balance sheet how much cash do you have

now as of 1231 as of december 31st

cash flow statement is measuring the

flow of cash from

january through december what what flows

happened

through that time period you might ask

what's the difference between the

statement of cash flows and the income

statement

well the income statement is what we're

going to be called on an accrual basis

and the cash flow statements on a cash

flow basis

so the reason we have the income

statement on an accrual basis

is because we want to recognize revenue

and expenses

when they were actually done meaning we

want to recognize revenue when the work

was done typically and expenses

when we actually consumed something in

order to help us generate revenue

in that time period if we were to use

cash flow

to measure then the the there could be

major distortions

based on uh prepayments paying before

you get something

or uh you know getting paid by the

customer before you actually do the work

so the cash if we were to depend simply

on cash flow there could be major

distortions

in the measurement process therefore

we're required to use

or we we will use and if you're publicly

traded company you typically will be

required to use

an accrual basis however cash flow is

still really

important because we want to make sure

that there is sufficient cash flow

and that's a healthy thing too so we

also need the statement of cash flows

as well okay so here's a quick overview

we'll go through this in a little bit

more detail

in a future presentation but the best

way to just get a handle on these

financial statements is to just

you know look at them so here's an

example of a balance sheet

so the balance sheet once again measures

where we stand at a point in time

it consists of what we'll call the

accounting equation

assets equal liabilities uh plus equity

and you can see that we are in balance

by the fact that the bottom line should

tie out

in in terms of total assets should be

equal to

the liabilities plus the equity so

that's going to be normally the the

accounting if you're an accountant

that's how you see the accounting

equation assets equal liabilities plus

equity

assets represent what the company has

now of course when you measure what the

company has

you measure them in dollars or whatever

unit of currency that that you are using

where i would think about dollars here

right so we've got 100 000

but then we also have like inventory

which we're valuing

at 430 000 worth of inventory not 430

000 units of inventory right

so we're valuing all this stuff in some

way shape or form

on uh dollars and then the liabilities

are

are what we owe so we owe liabilities

um to to a third party the the equity

represents then uh what is owned by the

owners or in other words you can think

of this as

assets is what the company has it's one

side of the coin

the other side of the coin is who has

claimed to those assets

either third party liabilities or

owners equity so if you think about it

in that light if you want to think about

well how can i value this company

what's basically the book value of this

company where do they stand at this

point in time

you could say well the company in total

has assets

of two two three five zero zero zero

and then they have liabilities minus the

liabilities

of the 101500

that means that the book value then is

equity

of one million two hundred and twenty

thousand

so if you if you look at the balance

sheet that tells you that's telling you

basically where the company stands at

this point in time

they have basically a book value of 1

million

220 000. why do i call it a book value

and not fair value

because we don't some of these assets

you know they're not being traded

currently on the market

so we don't you know the price of

inventory we don't really know for

certain

unless someone actually purchased it or

the property plant and equipment for

example

and sometimes we're going to use a

historical cost so that's going to be

one jumping off point or

starting point that you can use to help

you to value the company

but it's not the end value now if you

were thinking about the valuation of the

company on a market

then you could say okay that's how many

that's the book value

what if i took that and i did and i

allocated it out to the owners

and it's like well who are the owners

the owners are the shareholders

so so and notice the shareholders are

broken out into

into uh standard units of ownership so

because they're standard units of

ownership you can start to think about

this

this value being broken out evenly owned

over

shares units of ownership and we'll talk

more about that

in uh in a future presentation however

the market's not going to base the

valuation simply on

on the book value because they also want

to know what's the earning potential

maybe there's earning potential

beyond what is on the balance sheet

maybe there's like a brand name or some

goodwill

that will allow the company to earn have

earnings past

surpassing what simply the book value is

on the balance sheet

to determine that we're going to need

help from statements that are going to

be more of timing statements

so remember the balance sheet is as of a

point in time if you're talking about

financial statements for the year ended

december 31st the balance sheet is as of

december 31st in other words if you

looked at the balance sheet for the year

ended

december 31st january through december

and

and the financial statements for uh

for just the month of december the

balance sheet financial statement would

be the same for those two

sets of financial statements for the

entire and you know if you're looking

for financial statements for the entire

year december 31st and

and one month of december the balance

sheet would be the same because it's as

of december

31st what would differ the timing

statements

including the income statement the

income statement measures timing

so the income statement's trying to

break out how we did performance wise

last period because if you know how we

did performance

wise last period then you can you could

see if we can project that into the

future and see if we're going to do

performance wise as good

next period just like you would if

you're trying to measure how good a

baseball player is or something how many

hits did they have last

year you know how many hits do you think

they're going to have next year well all

we can look at is past performance

so we have the income statement you can

think of as two major components

that being revenue or income how much

how much we took in or how much we

earned

and then expenses expenses are things

that we consumed

used in order to generate the revenue

and then the bottom line is going to be

the net income so you can think of it on

a single step

statement a single step income statement

would simply be revenue

how much we pulled in minus expenses all

in one category

and that would give us the 100 that

would give us the net income

which we're calling you can also call

earnings after taxes

so that's basically the top line and

bottom nine now we typically will break

out the income statement in a multi-step

income statement so that we can break

out mult major categories of expenses

such as cost of goods sold the cost of

the inventory that we're using to sell

selling an admins a categorization and

then uh

then to get to the operating income and

then interest

expense and then we'll get to the income

before taxes and then we'll

calculate the taxes on it and then we'll

finally get to net income

but you can think and the income

statement can be quite long because of

that

categorization but uh if you break it

down to its

its normal components it's going to be

revenue minus

expenses now we can also on the income

statement break out and

take a look at try to figure out the

earnings as they are applied on a per

share basis

so once again if we're talking about the

earnings of the 160

000 and we know that the stocks are

broken out ownership is broken out in

even

chunks called shares then we can try to

say okay well how much of the earnings

are

allocable to each share and divide that

out

now preferred stock will muddy the water

a little bit but we'll talk about that

more

later and then we got the statement of

retained earnings

so the statement of retained earnings is

that linking document because you might

say well how's the balance sheet related

to the income statement now

well you can take beginning retained

earnings

that's the retained earnings as of the

end of last year or january of this year

into last year beginning of the current

year then you're going to take the

earnings available to the common

stockholder or

what was on the income statement the

basically the the net income but then we

had to take out the preferred stock

so the earnings available to the common

stockholders the 150

so basically the income statement amount

so that's how much

that's how much value on the balance

sheet that's how much the value of the

balance sheet basically went up the book

value meaning the equity section of the

balance sheet

went up by that much but then we also

paid dividends that's the money that's

going from the company

to the owners so like if you had a if

you had a sole proprietorship

you would earn money and then you would

draw money out which we would call a

withdraw or draw from the owner

well how do you do draws in a

corporation well you can't just have

individual owners drawing money out

because

each individual share is supposed to be

the same

in in value the unit evaluation so you

can't like pay out

one shareholder or not the other what

you when you when you pay out the shares

you have to pay out dividends to all

shares

evenly which means that one owner might

get more money

but that's because they own more shares

and so we call those dividends so the

dividend is going to be the outflow

the money that's going from the company

they've earned money now they're going

to give some back to the

to the owner in the form of dividends

and that would be the outflow

so the link then be between the equity

section the increase in the value of the

balance sheet is the beginning balance

and then you've got the net income or

earnings available to

common stockholders the bottom line in

essence of the income statement

and then you're going to subtract out

the dividends because those went out so

that means that the

net ending balance will be that 600 000

so in other words the 600 000 is on

here's the balance sheet

that's on the 600 000 here on the

balance sheet

okay and then you have this statement of

cash flows and this one

you kind of the other three statements

or you could think of the balance sheet

and the income statement basically

linked together

by the the statement of retained

earnings they're related

to each other and then the statement of

cash flows you kind of think of as like

a separate thing because it's basically

looking at the same data but it's

looking at it from a cash flow basis

so you're kind of using a different

basis you're kind of taking the

financial statements that you've done on

an accrual basis

reformatting constructing them into a

new

a different form which is going to be

the cash flow basis

so the cash flow basis you can think of

it similar at least the top point

portion of it it's going to be broken

out into three portions

cash flows from operating activities

cash flows from investing activities

cash flows from financing activities

the top portion cash flows from

operating activities

is is similar to the income statement in

that

the income statement ends with basically

net income

which is the bottom line earnings on an

accrual basis

and what we're trying to do is get to

net income

in essence on a cash basis meaning or

otherwise called

net cash flows from operating activities

so this top

portion is basically taking net income

and we're using an indirect method here

you can use the direct method or

indirect method we'll talk more about

that later but most of the time you'll

see an indirect method

which will take the net income on on the

income statement

reverse out or reconcile those items

that are accrual items differences

between the accrual basis and cash basis

to get to basically net income on a cash

basis or otherwise known as

net cash flows from operating activities

now there could be

other cash related activities including

uh cash flows from investing activities

which which might include like investing

in property plant and equipment or

something like that we call that

investing

and we'll talk more about that later in

cash flows from financing activities

such as loans or bonds that are issued

and

the dividends are are investing then we

have the

the change in the cash flow and then if

we add that to the beginning balance we

get to the actual cash flow on

the balance sheet so the bottom line of

the statement of cash flows will tie out

to the balance sheet so the 100 000

will tie out to the end point where we

stand at 12 31 the 100

000. the top part or the net income if

you're using an indirect method the 160

000

will then tie out to the income

statement here the

160 000. so here's all the financial

statements balance sheets now in a

vertical fashion which you might see it

in this fashion you could see it side by

side oftentimes

it's represented vertically in this

format

because it's just easier to to produce

oftentimes that way

and that just means so assets is right

here and that

equals the liabilities and equity down

below so

when you look at the financial

statements how do they tie together how

does the double entry accounting system

work

well you got the assets equal the

liabilities

plus the equity or assets equal

liabilities plus equity so those two

numbers have to equal

and you can also think of that as assets

minus liabilities

equals equity which means that 600 000

is kind of like the book value

of of the company so then you're going

to say well how's the balance sheet

related to the income statement the

income statement

is a performance number the income

statement represents

revenue minus all the expenses to get

down to net income

down to net income and then we have

preferred stock we'll talk more about

that later

to get to the earnings available to the

common stockholder

so how is this performance statement

related to the balance sheet the balance

sheet is as of the end of the period

the performance statement is measuring

how we did over the period balance sheet

is as of 12 31

for example december 31st income

statement is for the range

of january through uh december

so so how are these two linked together

well you can link them together

by by breaking out basically this uh

this net

value on the balance sheet number or the

stockholder within the equity section

the retained earnings

uh number so if you break out the

retained earnings number

you're going to get the beginning

retained earnings and then

that's where we were last time period

last point in time

as of december 31st last year or january

1st of the current year

and then you're going to add to it the

income statement item up here

and then you're going to subtract out

the dividends this is the missing piece

that isn't isn't indicated in these

other reports that's why you need the

linking document the statement of

retained earnings to get to the 600

000 that's going to be in uh the

retained earnings

now notice that the stockholders equity

the is showing here the preferred stock

the common stock

and the paid in capital represent

basically investments from the owner the

owner

purchasing stock from the company or the

stock being distributed

by the company so these are investments

in the company the retained earnings

represents what the company has earned

and has not yet

distributed over the life of the company

not just for the last

year and then we have the statement of

of cash flows the statement of cash

flows once again

we'll tie out net income should tie out

to the income statement

and the ending balance down here should

tie out to

the balance sheet so we'll break out

these and i'll we'll talk about them a

little bit more in detail

one by one in future presentations