Reading financial statement overview 1.purpose is to read annual report including financial statement. this modul is about income statement and cashflow statement. 0:15 The 3 key financial statements 0:50 1. balance sheet = statement of financial position. 2. income statement = P&L statement = operation statement 0:55 modul 1 has the balance sheet statement. 3. cash flow statement is in model 2. The income statement: 1:05 1. it contains the transaction of a company from a period of time. 2. it starts with zero balance from at a beginning of fiscal year. 3. it summarizes financial position: the amount of revenue earned, expense incurred, and net profit after amortization, interest, and taxes. 1:30 2. the purpose of income statements is showing profitability. Single step vs. Multi-step statements 1:55 1. Single step: revenue in one group and expense in another. profitability is not displayed until net income is there. 1:45 2. Multi-step: separate income and expense items into components to allow profitibility displayed in different stages. direct revenue and expense are shown to gross profit, then indirect are shown to operating income, then other reveneu and expense are shown to pre-tax income, then income tax is there to arrive at net income. Cost of sales 2:55 1. Cost of good sold or cost of sales ( service-based industry) 2. be shown as summarized line item 3. be broken down to expense item. 4. such as direct materials: these costs are shown to inventory on balance sheet but when items sold, this transferred to expense item. 5. such as direct labor: these cost are allocated to cost of sales. 3:40 6. such as direct overhead: related to production of good or services, can be reported on this line item too. SG&A, selling general, and administration.4:00 1. a broad expense item that group into 1 line item in income statement. 2. line items: advertising & promotion costs, legal & insurance & accounting costs, office supplies, rent, and other related expenses. 3. all are not directly attributed to the good or service being sold. Gain & loss 4:40 1. may grouped as "other income or expenses" 2. they are related to activities that are incidental 非主要的 to operations such as 1. sales of investment (or equipment), 2. foreign exchange translations, 3. financial instrument transactions (purchased at an amount but need to adjust to current market value depending on accounting law) The cash flow statement 5:30 1. the last statement prepared by the company, using from balance sheet and income sheet. 2. the net cash movement to a company for the year. when the opening cash balance from the beginning of the year is added to the net cash movement. the closing cash balance will match the cash reflected on the balance sheet. 5:40 The cash flow activities 5:50 1. purpose: where cash generated and used in business. 2. sorted by actitivity types: operating, investing and financing. Operating activities 6:10 1. day-to-day revenue & expense during the year. 2. depreciation and amoritization are not included, as they are not affecting the cash. Investing activities 6:30 1. relates to non-current asset that supports the business. 6:35 - property, plant, and equipment (received on disposal) - business acquisitions. 2. do this, if the company wants to remain viable and competitive Financing activities 6:50 1. relates to transaction regarding shares and debt. 7:00 2. raise funds by borrowing or issuing shares, then the company can choose to repurchase shares or pay back debts quickly. Direct vs. indirect method 7:25 1. ways to prepare the cash flow statement 2. indenpendent of how cash from operating activities derives, the result will be the same 8:00 Direct method 3. the direct method of cash flow starts with cash transaction, which be separated into cash received (customers receipts) and cash paid (disbursment to suppliers and employees) and other operating activities. 4. investing activities also separated into purchase and disposal. 5. financial activities also separated into issuances of shares and repayment of debt. 6. all 3 streams are netted to arrive at the net cash movement of the year. 8:20 Indirect method 8:30 1. starts with net income, while non-cash adjustments are then added. 2. working capital includes account receivables, inventory, and account payables 8:50 3. these adjustment are simply moving accrued-based to cash-basis. 9:00 4. ??? 9:20 Key elements in a cash flow statement 9:30 1. net cash provided by operating activities, and often used to finance the investing activities of the company. 2. changes in working capital: trend may indicate either financial stress or loose control over working capital. 9:55 3. PPE investment: a downward trend indicates a declining company. identify the neccessary sustainable level of expenditure. 4. financing requirement/ surplus: whether internally generated funds are sufficient to cover investments made in fixed assets and business. continuous deficit means growth depends on regular injection of external finance. The benefits of an annual report 10:30 1. contains large amount of financial and non-financial information 10:40 2. importance to investors and creditors to know the company's performance. 3. it includes operational & financial performance, and strategic direction Contents of an annual report 11:15 1. letter to shareholder: as executive summary signed by CEO & corporate governance 2. business execution: 3. management discussion & analysis, MD&A 4. reporting on internal controls: financial reporting and operating effectivly. 5. audit report 6. financial statements 7. and additional notes 8. earnings per share. 9. listings of directors and officers in the company. Management discussion & analysis MD&A 12:00 1. provide information regarding past performance and future strategic direction 2. act as source of variance analysis 3. identifies key risk facing the organization, and how to mitigate the risk.
Reading financial statement overview
1.purpose is to read annual report including financial statement. this modul is about income statement and cashflow statement. 0:15
The 3 key financial statements 0:50
1. balance sheet = statement of financial position.
2. income statement = P&L statement = operation statement 0:55
modul 1 has the balance sheet statement.
3. cash flow statement is in model 2.
The income statement: 1:05
1. it contains the transaction of a company from a period of time.
2. it starts with zero balance from at a beginning of fiscal year.
3. it summarizes financial position: the amount of revenue earned, expense incurred, and net profit after amortization, interest, and taxes. 1:30
2. the purpose of income statements is showing profitability.
Single step vs. Multi-step statements 1:55
1. Single step: revenue in one group and expense in another. profitability is not displayed until net income is there. 1:45
2. Multi-step: separate income and expense items into components to allow profitibility displayed in different stages. direct revenue and expense are shown to gross profit, then indirect are shown to operating income, then other reveneu and expense are shown to pre-tax income, then income tax is there to arrive at net income.
Cost of sales 2:55
1. Cost of good sold or cost of sales ( service-based industry)
2. be shown as summarized line item
3. be broken down to expense item.
4. such as direct materials: these costs are shown to inventory on balance sheet but when items sold, this transferred to expense item.
5. such as direct labor: these cost are allocated to cost of sales. 3:40
6. such as direct overhead: related to production of good or services, can be reported on this line item too.
SG&A, selling general, and administration.4:00
1. a broad expense item that group into 1 line item in income statement.
2. line items: advertising & promotion costs, legal & insurance & accounting costs, office supplies, rent, and other related expenses.
3. all are not directly attributed to the good or service being sold.
Gain & loss 4:40
1. may grouped as "other income or expenses"
2. they are related to activities that are incidental 非主要的 to operations such as 1. sales of investment (or equipment), 2. foreign exchange translations, 3. financial instrument transactions (purchased at an amount but need to adjust to current market value depending on accounting law)
The cash flow statement 5:30
1. the last statement prepared by the company, using from balance sheet and income sheet.
2. the net cash movement to a company for the year. when the opening cash balance from the beginning of the year is added to the net cash movement. the closing cash balance will match the cash reflected on the balance sheet. 5:40
The cash flow activities 5:50
1. purpose: where cash generated and used in business.
2. sorted by actitivity types: operating, investing and financing.
Operating activities 6:10
1. day-to-day revenue & expense during the year.
2. depreciation and amoritization are not included, as they are not affecting the cash.
Investing activities 6:30
1. relates to non-current asset that supports the business. 6:35
- property, plant, and equipment (received on disposal)
- business acquisitions.
2. do this, if the company wants to remain viable and competitive
Financing activities 6:50
1. relates to transaction regarding shares and debt. 7:00
2. raise funds by borrowing or issuing shares, then the company can choose to repurchase shares or pay back debts quickly.
Direct vs. indirect method 7:25
1. ways to prepare the cash flow statement
2. indenpendent of how cash from operating activities derives, the result will be the same 8:00
Direct method
3. the direct method of cash flow starts with cash transaction, which be separated into cash received (customers receipts) and cash paid (disbursment to suppliers and employees) and other operating activities.
4. investing activities also separated into purchase and disposal.
5. financial activities also separated into issuances of shares and repayment of debt.
6. all 3 streams are netted to arrive at the net cash movement of the year. 8:20
Indirect method 8:30
1. starts with net income, while non-cash adjustments are then added.
2. working capital includes account receivables, inventory, and account payables 8:50
3. these adjustment are simply moving accrued-based to cash-basis. 9:00
4. ??? 9:20
Key elements in a cash flow statement 9:30
1. net cash provided by operating activities, and often used to finance the investing activities of the company.
2. changes in working capital: trend may indicate either financial stress or loose control over working capital. 9:55
3. PPE investment: a downward trend indicates a declining company. identify the neccessary sustainable level of expenditure.
4. financing requirement/ surplus: whether internally generated funds are sufficient to cover investments made in fixed assets and business. continuous deficit means growth depends on regular injection of external finance.
The benefits of an annual report 10:30
1. contains large amount of financial and non-financial information 10:40
2. importance to investors and creditors to know the company's performance.
3. it includes operational & financial performance, and strategic direction
Contents of an annual report 11:15
1. letter to shareholder: as executive summary signed by CEO & corporate governance
2. business execution:
3. management discussion & analysis, MD&A
4. reporting on internal controls: financial reporting and operating effectivly.
5. audit report
6. financial statements
7. and additional notes
8. earnings per share.
9. listings of directors and officers in the company.
Management discussion & analysis MD&A 12:00
1. provide information regarding past performance and future strategic direction
2. act as source of variance analysis
3. identifies key risk facing the organization, and how to mitigate the risk.
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