Understanding Financial Statements, Revised Edition

Everything you always wanted to know about those confusing financial statements but were too embarrassed to ask! This friendly primer of basic business finances takes you step-by-step through all the fundamentals from balance sheets to profit and loss statements—and translates them into meaningful, usable information. A beginner’s bible! 

Table of Contents

Introduction

Part 1: Basics of Financial Statements
What Are Financial Statements and Who Uses Them?
The Balance Sheet
Glossary of Balance Sheet Terms
Sample Balance Sheets
Why Net Worth Is Not Always the Same as Market Value
The Income Statement
Sample Income Statement
Glossary of Income Statement Terms
Why Income Does Not Always Equal Cash
The Cash Flow Statement
Sample Cash Flow Statement
Glossary of Cash Flow Terms
Summary of Part 1

Part 2: Understanding Ratios and Percentages
Using Ratios Without Fear
How Ratios Are Developed
Five Basic Rules for Ratios
Summary of Part 2

Part 3: Four Types of Ratios
Introduction to Ratios
Glossary for Ratio Analysis
Ratio 1: Liquidity Ratios
Current Ratio
Turnover of Cash Ratio
Debt to Equity Ratio
Summary of Liquidity Ratios
Ratio 2: Profitability Ratios
Rate of Return on Sales Ratio
Rate of Return on Assets Ratio (ROA)
Rate of Return on Investment Ratio (ROI)
Summary of Profitability Ratios
Ratio 3: Efficiency Ratios
Average Collection Period Ratio
Inventory Turnover Ratio
Fixed Asset Turnover Ratio
Summary of Efficiency Ratios
Ratio 4: Market Ratios
Earnings Per Share
Price/Earning Ratio (P/E)
Dividend Yield

Part 4: How to Perform a Ratio Analysis
Introduction
What Is Significant?
Ratio Review Chart
Afterword
Summary of Part 4

Part 5: How to Perform an Expense Analysis
Is Anything Good About Expenses?
Examining Your Expenses
Increase the Return on Expenses
Summary of Part 5

Part 6: How to Control Your Business
How to Proceed
Trend Analysis
Cash Position Charting
Development of a Target Statement
Accounts Receivable Aging Schedule
Summary of Part 6

Appendix

Objectives

•  Learn how the three primary financial statements are prepared and what each means to a business
•  Understand the differences between cash and profit from an accrual prospective
•  Become acquainted with ratios and proportions and how they are developed and used
•  Learn how to examine and get better productivity from expenses
•  Discover tested techniques for gaining better control over business finances

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