Brief Introduction on

Balance Sheet, Income Statement

and Cash flow Statement
INFORMATION

Gather
Analyze
DECIDE!!

Information
Accounting
Quantitative: eg. Revenue,
Profit, Expenses
Non-Accounting
Qualitative: eg.
Management
Quantitative: Employee
turnover, Market Share

B/S.Balance Sheet
LIABILITY
Financing Side
Paid Up: $1,000/person
Total Paid Up: $1,000 *
8 = $8,000

ASSET
Investing Side
Bank: $8,000

Liability + Owners Equity = Asset

Company XYZ
B/SAfter Loan
LIABILITY
Financing Side
Paid Up: $1,000/person
Total Paid Up: $1,000 *
8 = $8,000
Loan: $12,000

ASSET
Investing Side
Bank: $8,000 $20,000

Liability + Owners Equity = Asset

Company XYZ
B/S..After Investment
LIABILITY
Financing Side
Paid Up: $1,000/person
Total Paid Up: $1,000 *
8 = $8,000 (Equity Capital)
Loan: $12,000 (Debt Capital)

ASSET
Investing Side
Bank: $20,000 $2000
Land: $18,000


Liability + Owners Equity = Asset

Company XYZ
Keep in mind!!!!
Profit & retained profit belongs to share
holders
Receivables is assumption of collectability
Sale is transfer of product and not receipt of
cash
Equity=Paid-Up Capital + Retained Profit
Total Capital = Equity Capital + Debt Capital

I/S.Income Statement
Cost = $18,000 Sales =$25,000
What happens when only 60% of sales
amount is received and 40% is pending?
B/S.After receiving 60% payment
LIABILITY
Financing Side
Paid Up: $1,000/person
Total Paid Up: $1,000 *
8 = $8,000 (Equity Capital)
Retained
Profit:$7000(Equity Capital)
Loan: $12,000 (Debt Capital)

ASSET
Investing Side
Bank: $2,000 $17,000
Land: $18,000 $0
Receivable: $10,000


Liability + Owners Equity = Asset

Company XYZ
$15000 from sales and
previous $2000
At The End We Have

Loan + Owners Equity = Asset
$12000
$15,000
$27,000
C/SCash Flow Statement
Cash From Financing +$20,000
Cash For Investment -$18,000
Cash From Operation -$15,000

Net Cash Flow: -$3,000


ROE (Return on Equity)

Total Capital ($20,000)= Debt Capital ($12,000) + Equity Capital ($8,000)
ROE = Profit/Equity
= 7000/8000
= 87.5%
However, if expenses are considered, profit will be
decreased accordingly. Eg, interest on loan of
14%.
ROE = 5,320/8,000
= 66.5%
Profit after interest of
14% on $12000, $1,680
ROE (Return on Equity)

Total Capital ($20,000)= Debt Capital ($8,000) + Equity Capital ($12,000)
ROE = Profit/Equity
= 7,000/12,000
= 58.3%
However, if expenses are considered, profit will be
decreased accordingly. Eg, interest on loan of
14%.
ROE = 5,880/12,000
= 49%

Profit after interest of 14%
on $8000, $1,120
Conclusion: ROE depends on operations and financing.
Thank you!!



ANY QUESTIONS??