Table of Contents Hide
- FINANCIAL STATEMENT OF A COMPANY
- WHAT ARE THE BEST FINANCIAL STATEMENT
- FORMAT OF THE FINANCIAL STATEMENT OF A COMPANY
- SAMPLES FOR THE FINANCIAL STATEMENT OF A COMPANY
- TEMPLATES FOR FINANCIAL STATEMENT OF A COMPANY
- PDFS FOR THE FINANCIAL STATEMENT OF A COMPANY
All business owners as well as companies. Should know the benefit of preparing a financial statement of a company at the end of a financial year. Preparing a financial statement? Then this post should be of help for the knowledge of financial statement of a company, what are the best financial statement, financial statement of a company format, the financial statement of company samples, the financial statement of company templates, and financial statement of a company PDF
FINANCIAL STATEMENT OF A COMPANY
The financial statement of a company basically shows you where your money is, how it came from, and where it went. Businesses face lots of financial risks with lots of financial decisions to make daily. So, every company must have a financial statement of a company. As well as every business-oriented individual should have a basic knowledge of a financial statement of a company. You don’t necessarily need to be an accountant to be able to understand the financial statement of a company. Once you have a few basic starts of accounting you will be able to read and take out points from a financial statement of a company.
There are 4 major financial statements of a company parts and they include:
This financial statement of a company basically shows what the company owes as well as what it owes at a particular point in time. This means the balance sheet shows the company’s assets, liabilities, and shareholder’s equity too.
Assets are items a company owes that have values. Some of these assets include inventory, plant, trucks, equipment. Although all these things are physical properties. The asset also includes items that can be touched but still have a value such as trademarks and patents. An example of this can be investment or cash.
In the balance sheet asset are listed according to how quickly they are converted to cash. Bringing us to the various types of asset which include:
CURRENT ASSET: This is the type of asset a company is required to sell within one year. A good example of this asset is a company’s inventory.
NON-CURRENT ASSET: A direct opposite of the current account which are items of a company that will take longer than a year to sell as well as not expected to be converted to cash at the space of one year. These examples are fixed assets which include: furniture and trucks. Fixed assets are those items used in the running of the business but are not for sale.
This can be said to be the opposite of assets since liabilities are simply what a company owes another. It can appear in various forms such as obligations to provide services. Or even goods to customers in the future, environmental cleanup cost. And taxes owned, rent for the use of a building, loan from a bank to launch a new product, money for supplier money for supplied goods. Also, payroll owing to employees.
Liabilities can either be current or long-term. They are listed based on their expiring dates because current liabilities are obligations owed expected to be paid off within one year. While long-term liabilities are obligations owned by a company that can be tolerated for more than one year for payment.
SHARE HOLDER’S EQUITY
This is the part in a financial statement called the shareholder’s equity which is also capital or net worth. It is the fund left if a company would sell all its assets to pay off its liabilities. The remaining fund belongs to the shareholder or owners of the company as the case may be. Most times companies distribute earnings instead of holding on to them. The distributions are dividends.
The balance sheet is an essential part of the financial statement of a company. That specializes in showing a clear shot of the assets, liabilities, and share holder’s equity at the end of the financial year.
CASH FLOW STATEMENTS
The inflow and outflows of cash in a company are records in the cash flow statement of a company. The cash flows tell in if the company generated cash at the need of a financial year. Companies need cash at hand to purchase assets and as well as pay for its expenses
The end aim of cash flow statements is to show the net increase or decrease at the end of a financial year. Which is why this statement shows changes over time instead of the absolute dollar amount at a particular period.
For the purpose of a better review, cash flow statements are divided into 3 different activities and they are:
This part of the statement analyses the company’s net income to lose. As well as adjust for any cash that was used by other operating assets and liabilities. It also adjusts net income for items that are non-cash like adding back depreciation costs.
Most companies in this section reconcile the overall net income to the actual income cash the company used in operating for the financial year.
Financial activities of a company include: paying back a loan, cash generated by selling stocks or bonds. The financial activity sector of the cash flow statement is the financial statement of a company. That shows the cash flow from all financial doings of the company.
Purchase of long-term assets like plant, equipment, and investment securities. Are the details of the investing activities of a cash flow financial statement. For instance, if a company chose to sell off some investments of hers. The results from the sales will show in the investing activity of a cash flow financial statement because it provided cash.
This financial statement shows the revenue a company acquires. Over a specific period of time (often a year or some part of a year). Expenses connecting to earning the revenue are also in notes in this statement. This might seem more like a financial goal for the business but in a more detailed manner.
The statement treats the company’s net earnings or loss as well as earnings per share. The essence of this calculation is to tell you how much a shareholder in a company would receive. If the net income were to share at the end of an accounting year. (Although companies never share all their net income instead they reinvest them.
Starting off this statement, the top line contains the total amount of money brought in for the sales of goods and services called the gross revenue. Simply because the removal of expenses have is not done. Therefore gross starting is not even refining.
Accepting some returns by the company such as merchandise returns or a sales discount. Although this could be due is not acceptable. Removing allowances and returns from the company’s gross revenue, you arrive at its net revenue.
Moving down the line in creating our income statement the next content should be the cost of sales. The function of the cost sales like its name simply shows the cost of money the company spends. On producing goods and services which they use for the financial year.
The next action to observe is to deduct the cost of sales from the net revenue to get gross profit. Remember gross means not refine or certain because deducts are yet on some expenses.
Let’s talk about operating expenses in this section. The kind of expenses that go towards supporting the company’s activities for the financial year. These expenses are different from the cost of sales. Because sales costs can link straight to the production of goods and services sold in the company. Examples of these operating expenses are the salaries of the administrative persons. Marketing expenses and also the cost and on researching new products. Remember operating expenses can not link directly to the production of goods and services.
The wear and tear of some long-term assets such as machinery, tools, and furniture result in this financial statement. Depreciation is also deducted from gross profits because the term in which these tools are used, money is also been spent on it, the process of spreading this cost is called depreciation. While the cost of using this asset during the financial period is a fiction of the original cost of the assets.
The income of operations is what you will arrive at when all operating expenses deducts from the gross profit. Companies should be able to account for interest income and interest expenses. However, interest income is money a company gets interest paying to them as a result of keeping their money in an income-bearing savings account. While income expenses are the money a company pays in interest as a result of the money the company borrows.
While some income statements account for the interest income and the interest expenses separately, others account for the collection. Whichever way did, the interest income and interest expenses we will subtract or add to arrive at operating profit before heading to the income tax.
Income tax deducts led you directly to the bottom line of net profit or net losses. This is the purpose of creating a financial statement of a company because when you arrive at this point, it clearly shows if the companies have made a profit or acquire losses at the end of an accounting year.
FINANCIAL STATEMENT RATIO AND CALCULATIONS
Terms like current ratio and operating margin also PE ratio might sound familiar to you or maybe you heard people talking about them. You are wondering what they mean. Plus they don’t even appear on the financial statements.
I am going to treat ratios which some investors use in calculating information on financial statement which they use in evaluating a company’s account. Although choice of ratio might vary from one company to another.
For better understanding of the vary rule, if a company has a debit-to-equity ratio of 2 to 1 then it simply implies that the company is taking on debt twice the rate the owners are investing on the business.
I Often express this as a percentage which shows that for each dollar put in sales what was the percentage profit. Operating margin =income from operations and net revenue. We can find both the operating income and the net revenue in the operating margin financial statement because its work is to compare both too.
Divide the company’s income from its operations to arrive at the company’s operating margin just before the interest and income expenses.
INVENTORY TURNOVER RATIO
The inventory turnover simply means if a company is stated as 2 to 1 then it clears that the company’s inventory turned over twice in the accounting period. Inventory turnover ratio=average inventory for the period and cost of sales.
Comparing the company’s cost of sale on its income statement using its average income of the period. Calculating the average inventory balance look at the inventory numbers lists on the balance sheet carry the lists of the number on the balance sheet for the period then add them to the balance that lists for the previous period and divide by two.
Remember the inventory balance for the previous is the beginning balance for the current period is the ending balance because balance sheets are snapshots in time.
Calculating the inventory turnover ratio, divide the company’s cost of sales by the average inventory for the period. The result is your inventory turnover ratio.
Let’s use an instance to explaining this. Assuming a company is earning $2 per share while selling the company stock at $20 per share. Then the company’s PE ratio is 10 to 1 which means 10 times its earning on selling its stock.
In order to arrive at a company’s PE ratio you need to divide the company’s stock price by its earnings per share. PE ratio also compares a company’s common stock price with its earnings per share.
WHAT ARE THE BEST FINANCIAL STATEMENT
People tend to always ask which parts of the financial statement of a company is the best or most important. To me all are important and as well as play their separate. However, there are parts in the financial statement of a company that when you miss them can’t be full or whole. While they are still other parts that wouldn’t necessarily affect the financial statement if they miss out.
The parts that majorly complete the financial statement of a company are what I consider as the best financial statement. Those sections include;
The balance sheet is important because it is relative to the income statement to produce the amount of investment you need to support the sales and also profits which are on the income statement.
There are a lot of ratios analysts who use to gauge the efficiency of a company’s balance sheet. Most of them include asset turnover, receivable turnover, and days to sales, quick ratio, debt to assets and debt to equity.
Lastly a thoroughly analysis of the balance sheet could offer many quick views because in order for a balance sheet to balance assets, assets must be in turn equal to liabilities plus equity. Analysts see the assets subtracting the liabilities as the book value of a firm. Looking at the long-term assets analysts determines how effectively companies have managed its receivables in the short term.
This regards as the most important for many financial statement users since it shows the power of a business to generate profit. However, the income statement should not be in use by itself as the information to be visible will be misleading. Because it does not show the amount of assets and liabilities we need to generate a profit also its results don’t equate to the cash flow raised by the business.
Generally the income statement provides information on the revenue a company earns as well as the expenses involved in its operating activities. It also provides more details on the holistic activities of a company. The direct, indirect, and capital expenses a company incurs are also parts of the income statement.
Transparency is the central work of the income statement especially in dealing with the company’s operating services and also a company’s other two financial statements the net income and sales booked.
CASH FLOW STATEMENT
This statement reports all cash inflows and outflows of the financial accounting period with the summarization of the available cash at hand. Overall liquidity of cash transaction doings of the company is visible also in the cash flow statement.
The two sectors of the cash flow statement which is the investing and financing are close with the work of capital planning for the firm which also interconnects with the liabilities and equity on the balance sheet. The financing cash activities show concern on capital structure funding, stock issuance, cash payments for duties such as interest and dividends and also showing proceeds from debt.
While investing cash functions mainly focus on assets and show asset purchases and profits from invested assets.
FORMAT OF THE FINANCIAL STATEMENT OF A COMPANY
Study of a standard format for the approach of these financial statements should be sure because when your financial statements construct is bad? it’s as good as a failure. Some of the formats of the financial statement of a company to consider include:
BASIC INCOME STATEMENT
For this format of the financial statement of a company. Revenues are first then expenses follow. The net income of the company is sure by subtracting the expenses from the revenue making it a simple version of an income statement used by most service providers. As well as others that do not possess a cost of goods sold for the services they use to create interest. When there is a cost of goods that are sold, the income statement is the more involved statement.
INCOME STATEMENT FOR MANUFACTURING
The first line in this format of the financial statement of a company is for gross income or revenue only, which removing the cost of goods manufactured or sold follows. A gross income amount is a result.
List of expenses are containing in the second part of the income statement in the format of the financial statement of a company.
Costs associated with the selling, general and administrative parts of the company. Will subtract from the gross income to reveal the operating income while the last part subtracts all other expenses, taxes, and interest expenses to get at the net income of the company.
It is important to note that the total assets must equal to the total liabilities and shareholders’ equity. As discussed above the balance sheet reflects the assets, liabilities and share holders equity in the company.
In the first line of the balance sheet accounting of the format of the financial statement of a company. It is should list all assets including investments, cash, real estate, other company’s holdings, and equipment. The following line cover information like the liabilities of the company like any loans or accounts payable. Finally, the share holder’s equity should state the difference between the total assets and total liabilities.
NB: The above explains balance sheet account for a small company is enough to cover up the financial statement while for a larger company it might be possible so it requires they break down assets and liabilities to their forms which include current and long-term assets and liabilities. Add the balance sheet difference in a case of large companies.
CASH FLOW STATEMENT
A lot of companies handle their accounting on an accrual basis which means they will be able to recognize the income a contract receives. When possibly you execute the contract and not necessarily when the cash comes in. Their aid is obviously the format of the financial statement of a company from other companies.
The cash flow statement in the format of the financial statement of a company shows that when you receive cash. And also aids investors to determine if the company is facing difficulty managing its cash flow. Format of the cash flow starts with the cash flow activities. Ranging from its operations, following investing cash flow and cash flow from operations.
Significantly each category shows incoming and outgoing cash from the company. The ending cash flow should be equal to the amount in the format of the financial statement of a company.
SAMPLES FOR THE FINANCIAL STATEMENT OF A COMPANY
Samples for the financial statement of a company are major guides to aid you to create a well detailed financial statement for your company. As we have already discussed creating a financial statement requires some elements to complete. These samples for the financial statements of a company will show you the elements. Preparing a financial statement with a sample? you should be careful not to copy in details of the sample company to your companies statement. One danger in the samples for the financial statement of a company.
But then if all the elements were missing in creating a financial statement. These three shouldn’t be missing in the financial statement of a company. After a rundown on this sample for the financial statement of a company, you would know it’s important to you.
These samples for the financial statement of a company accounts include cash flow statements, income statements, and balance sheets. Samples for the financial statement of a company are visible below accordingly.
The three main samples for the financial statement of a company are what have been shown above. You can use those samples for the financial statement of a company to create your own financial statement.
TEMPLATES FOR FINANCIAL STATEMENT OF A COMPANY
Templates of a financial statement of a company is now our discuss here. Companies that seek to attain their profit and loss margin at the end of each financial year should be able to provide a detailed financial statement at the end of each accounting year. Templates are a guide that provides a compressed way for you to go about your financial statement writing.
Below are a few examples of templates for the financial statement of a company for clearer and easy production of your companies’ financial statement.
Templates for the financial statement of a company including balance sheet, cash flow, income statement. Are all available very in detail in this post below.
However, we should pay extra attention to preparing financial statements of our company so we don’t go about mixing up these contents of the financial statement for another. Templates of the most important parts of the financial statement of a company which is the cash flow, income statement, and balance sheet are shown below for guidance purposes.
Templates of the financial statement of a company are just basic sights to enable you prepare your financial statement of a company. With the aid of the templates of the financial statement of a comapny above you can see how others try to prepare theirs and get started with yours.
We are not in anyway afflicted with the templates of the financial statement of a company provided.
PDFS FOR THE FINANCIAL STATEMENT OF A COMPANY
PDFS for the financial statement of a company is always recommended in a better understanding of the financial statement of a company. These PDFS for the financial statement of a company to aid your research are listed below. Click on them for easy access to PDFS for the financial statement of a company.
Introduction to the Financial statement for business entities
Financial statements new ground PDFS for the financial statement of a company
The Financial statements PDFS for the financial statement of a company
Read the PDFS for the financial statement of a company-provided for a wider knowledge of the financial statement of a company. You can decide to search for more PDFS for the financial statement of a company as well as compare PDFS for the financial statement of a company too.
Financial statement of company is the end result of that company’s financial dealings and activities at the end or quarterly as preferred of each accounting year. For a business or company to be responsible for its financial dealings and as well grow as a business, records of financial statement of the company will be the only solution to landing such results.