Financial Statements: key terms, formulas and examples
Three statements tell the story: the balance sheet is a snapshot of assets, liabilities and equity; the income statement shows profit; the cash flow statement tracks real money.
Example
Assets 500 = liabilities 200 + equity 300. It always balances.
Takeaway
Read all three together; one alone can mislead.
Key terms
- Balance sheet
- A snapshot of assets, liabilities and equity on one date.
- Income statement
- Shows revenue, costs and profit over a period.
- Assets
- Things a company owns that have value.
- Liabilities
- What a company owes to others.
- Equity
- The owners' share: assets minus liabilities.
- Cash flow statement
- Report of cash coming in and out from operations, investing and financing.
- Operating profit
- Profit from core operations before interest and taxes.
Formulas
Asset turnoverR ÷ Avg A
Equity multiplierA ÷ E
DuPont ROE(NI ÷ R) × (R ÷ A) × (A ÷ E) × 100
Receivables turnoverR ÷ AR
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