The document discusses three key financial statements: the profit and loss statement, cash flow statement, and balance sheet. The profit and loss statement shows revenues, costs and expenses over a period of time. The cash flow statement displays cash inflows and outflows in operations, investing, and financing. It is essential for measuring solvency. The balance sheet summarizes assets, liabilities, and shareholders' equity at a point in time and calculates net worth.

1. Financial
Statements
Rhea G. Jardin
SPENTREP S10

2. Three (3) Financial Statements
The financial statements (FS) show the
financial health of a business
1. Profit and Loss
2. Cash Flow
3. Balance Sheet

3. Profit and Loss Statement
• Summarizes the revenues, costs and
expenses incurred during a specific period
of time (quarterly, fiscal, year)
• Provides information that shows the ability
of a company to generate profit by
increasing revenue and decreasing costs
• Also known as “income statement” or
“income and expense statement”

4. Profit and Loss Statement

5. Cash Flow Statement
Cash Flow:
• A revenue or expense stream that changes a
cash account over a given period
• Essential to solvency of a company
Statement of Cash Flow:
• Shows the amount of cash generated and used
in a given period
• Indication of a company’s financial strength
• It helps investors see if a company is having
trouble with cash

6. Cash Flow Statement
Cash Activities (inflows / outflows):
1. Operations
- Depreciation expenses
- Deferred taxes
- Account receivables / Account payables
2. Investing
- Investing of excess cash in different investments (stocks/bonds)
- Buying or selling of subsidiaries
- Acquisition/dispose of physical property such as PPE
3. Financing
- Long term liabilities
- Stockholders’ equity
- Dividend payments

7. Cash Flow Statement

8. Cash Flow Statement
Four (4) steps in managing cash flow
1. Measuring cash flow
- Prepare cash flow projections
- Know when payments, interest earnings, collections and other
sources are going to get in
- Detailed knowledge of amounts and dates of upcoming cash
outlays (rent, inventory, wages, utilities, debt payments)
2. Improving receivables / speed of collection
- Offer discounts who pay bills rapidly
- Ask for deposit payments at the time of order
- Require credit checks on noncash customers
- Track accounts receivables to identify and avoid slow-paying
customers

9. Cash Flow Statement
3. Managing payables
- Take full advantage of creditor payment terms
- Use electronic fund transfer on the last day they are due
- Communicate with your suppliers if you need to delay payments
- Carefully consider vendors’ offers of discounts for earlier
payments
- Don’t always focus on lowest price when choosing suppliers –
consider flexible payment terms
4. Surviving shortfalls
- Be aware of cash shortfalls as early and as accurately as
possible
- Choose the bills you’ll pay carefully (payroll, crucial suppliers)

10. Balance Sheet
• Summarizes a company’s assets, liabilities and
shareholders’ equity at a specific point in time
• A tool to calculate the net worth of a business
(financial ratios)
• The 3 segments give investors an idea as to
what the company owns and owes, as well as
the amount invested by the shareholders
• It is called such because the two sides balance
out
Assets = Liabilities + Shareholders’ Equity

11. Balance Sheet

12. Sources
• http://www.investorwords.com
• The Ins and Outs of Cash Flow Statements
http://www.entrepreneur.com/article/178302
• How to better manage your cash flow,
http://www.entrepreneur.com/article/66008
• http://www.investopedia.com