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The Four Financial Statements - we use in analysing, evaluating companies…
The Four Financial Statements - we use in analysing, evaluating companies and doing our accounting.
Balance sheet
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It says, as of year ending Dec 31st,2016. It says, as of a specific date, that's where the balance sheet is.
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Income statement
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The income statement takes place over a period of time. And that period of time depends on you. You can run an income statement from the very first transaction that was ever conducted in the business.
More often, we do income statements for quarter and income statements for the year
Income statement lists all of the different sources of revenues, all of the different sources of costs and subtracts the costs from the revenues, arrives at the income.
Cash Flow statement
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If I'm running a retail business, I sell things to the public so I will have to pay tax/VAT to the government. So every quarter, I have to send a cheque of all the tax that I have collected during that period to the government.
We see this in cash flow statement, not in income statement
Tax is not an income, it doesn't go anywhere on the income statement. The tax that I pay is a cost on my income statement
Shareholder's Equity
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Equity is the ownership of the company. So if it's a public traded company, how many shares were bought, or sold, or issued
How much money has been paid into the company? How much of ownership has been taken out of the company? In a typically traded company on the stock market, the payment of the dividends is the returning of equity to the owners.
If the company has generated an ownership value of a certain amount and they to pay back to the owners, or pay a portion back to the owners. That is going to be the equity of the company