Financial tatements.docVIP

Financial Statements – 1 Financial Statement Overview Income Statement income earned for a period of time Revenue - earned in current period - Expenses - costs incurred to generate this year’s revenue Net Income Balance Sheet - financial position at a point in time everything which has happened to company summarized here OWN = OWE Creditors Owners Assets = Liabilities Shareholders’ Equity Capital Stock (sale of shares) Retained Earnings (Net Income – Dividends) (+/- Non-cash items) Cash Flow Cash In - Cash Out Incorporation - private corporation ( 50 -by laws proxy voting trust - in restructuring - for specific period or until specific results achieved - voting control to trustee responsibilities of directors Advantages limited liability continuity of existence transfer of ownership ability to finance taxation growth legal entity professional management Disadvantages loss of flexibility taxation expenses capital withdrawal Financial Statements - 2 INCOME STATEMENT Sales Less: Cost of Goods Sold - cost of manufacturing or purchasing goods for sale ________________________ Gross Operating Profit (Gross Margin) Less: Operating, Selling Administrative Expenses Depreciation, Depletion, Amortization depreciation - using up of fixed assets over their useful life depletion - natural resources amortization - intangibles ________________________ Net Operating Profit (EBIT) Less: Interest Expense Plus: Interest Income Other Income _________________________ Earnings before Income Taxes Less: Income Taxes - Current - payable this year - Deferred - resulting from this years income but payable in the future _________________________ Earnings Less: Minority Interest - see discussion below Plus: Equity Income - _________________________ Earnings before Extraordinary Items Less/Plus: Extraordinary Items - see discussion below ________