Financial Statements Cheat Sheet (DRAFT) by JP02

Written records
Convey:
1. Business activity
2. Financial Perfor­mance
Audited by govt agencies, accoun­tants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes
Primary financial statem­ents:
1. Balance Sheet
2. Income Statement
3. Statement of Cash Flow
4. Statement of Changes in Equity

Unders­tanding Financial Statements
Invest­ors­/fi­nancial analysts rely on financial data to:
1. Analyze perfor­mance
2. Make predic­tions about the future directions of the company's stock price
Annual report (includes financial statem­ents) - reliable and audited financial data source
Used by investors, market analysts, creditors, to evaluate:
1. Financial health
2. Earnings potential

Financial statements are the ticket to external evaluation of a company's financial perfor­mance. The balance sheet reports a company's financial health through its liquidity and solvency, while the income statement reports a company's profit­abi­lity. A statement of cash flow tie these two together by tracking sources and uses of cash. Together, financial statements commun­icate how a company is doing over time and against its compet­itors.

Provides overview of assets, liabil­ities, and shareh­olders' equity as a snapshot in tome (generally the end of the reporting period).

Assets
Cash and cash equiva­lents
Accounts receivable (A/R)
Inventory
Prepaid Expenses
Property, plant, and equipment (PPE)
Invest­ments
Tradem­arks, patents, goodwill, and other intangible assets

Liabil­ities
Accounts payable (A/P)
Wages payable
Notes payable (N/P)
Dividends
Long-term debt

Shareh­olders' Equity
Represents the amount of money that would be returned to shareh­olders if all of the assets were liquidated and all of the company's debt was paid off.
Retained earnings

Measures how well a company generates cash to pay debt obliga­tions, fund operating expenses and invest­ments
Illust­rates operat­ions, cash inflow­s/o­utflows
Reconciles the income statement w/ the balance sheet in three major business activities

Operating Activities
Any sources and uses of cash from running the business and selling produc­ts/­ser­vices
Can include any changes made in cash accounts receiv­able, deprec­iation, inventory, and accounts payable
Also includes wages, income tax payments, rent, cash recepits of produc­t/s­ervice sales

Investing Activities
Any sources and uses from a companys invest­ments in the long-term future
Purcha­se/sale of asset
Loans made to vendors or received from customers
Any payments related to merger­/ac­qui­stion
Also, purchases of fixed assets (PPE)

Financing Activities
Sources of cash from investors or banks, uses of cash paid to shareh­olders
Can include debt issuance, equity issuance, stock repurc­hases, loans, dividends paid, and repayments of debt

Covers a range of time
Provides overview of revenues, expenses, net income, and earnings per share
Conveys:
1. Details of profit­ability
2. Financial results of business activities
Also illust­rates how well a companys management is contro­lling expenses

Revenue
Operating revenue (generated from the core business activi­ties)
Non-op­erating revenue (generated from the non-core business activi­ties)
Other income (revenue earned from other activi­ties), can include gains from sale of long-term assets

Expenses
Costs of goods sold (COGS)
Selling, general and admini­str­ative expenses (SG&A)
Deprec­iat­ion­/Am­ort­ization
Research and develo­pment (R&D)
Employee wages
Sales commis­sions
Utilties
Interest on loans or debt
Losses from sale of asset

Tracks total equity over time
The ending balance in statement of changes in shareh­older equity is equal to the total equity reported on the balance sheet

Beginning equity: equity at the end of last period that simply rolls to the start of the next period
(+) Net income: amount of income earned in a given period. The proceeds from operations are automa­tically recognized as equity in the company, and this income is rolled into retained earnings at year-end
(-) Dividends: amount of money that is paid out to shareh­olders from profits. Instead of keeping all of a company's profits, the company may choose to give some profits away to investors
(+/-) Other compre­hensive income: the period­-ov­er-­period change in other compre­hensive income. Depending on transa­ctions, this figure may be an addition or subtra­ction from equity

Summarizes standard net income while also incorp­orating changes in other compre­hensive income (OCI)
OCI includes all unrealized gains and losses not reported on the income statement
illust­rates total change income, even gains and losses that have yet to be recorded in accordance to accounting rules
Can include: net income (from income statem­ent), unrealized gains or losses from debt securities or derivative instru­ments ore retirement programs, unrealized transl­ation adjust­ments due to foreign currency