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Financial Statements Essay

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Below is an essay on "Financial Statements" from Anti Essays, your source for research papers, essays, and term paper examples.

FINANCIAL STATEMENTS 
  1. Balance Sheet
A balance sheet is a list of Assets, Liabilities and Net Worth of a business on a specific date in time.
A well known formula to determine Net Worth is:
Assets - Liabilities = Net Worth.

Therefore if your business has assets of $150 million and liabilities of $75 million,   your net worth would be: $150 - $75 = $75 million.
 
  EXAMPLE CO.
Balance Sheet
AS OF 12/31/95
  |
ASSETS
  | | LIABILITIES
  | |
Current Assets | 100 | Curremt Liabilities | 50 |
Fixed Assets | 50 | Long Term Liabilities | 25 |
| | Total Liabilities | 75 |
| | Net Worth | 75 |
  | | | |
TOTAL ASSETS | 150 | TOTAL LIAB & N/W | 150 |
|
Description
  * Current Assets: Assets that will be converted to cash within 1 year. These are normally assets that are used in the ordinary course of business, like accounts receivable and inventory.
  * Fixed Assets: Assets considered as long term assets. Assets not used in the ordinary course course of business like land, building, equipment, furniture, vehicles, etc.
  * Current Liabilities: Debts that are considered short term in nature; usually bills that must be paid within 1 year.
  * Long Term Liabilities: Debts that are due for payment more than 1 year from the statement's date.
  * Net Worth or Equity: Assets - liabilities = net worth.
  2. Income Statement (aka Profit & Loss, P & L Statement, etc)
The income statement is a list of a company's income, expenses and  profit or loss over a specific period of time.
There are many types of Income statements, depending upon the type of business your are in, but generally, one can usually find the following major categories when looking at an income statement.
 
Example Co. Income Statement For Period 1/1/95 - 12/31/95   Sales | 250,000 |
  | |
Cost of Goods Sold | -180,000 |
  | |
Gross Profit | 70,000 |...

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