Unit 3 D196 WGU

Primary Financial Statements

balance sheet, income statement, and statement of cash flows

Balance sheet

reports the resources of a company (Assets) and the company's obligations (liabilities), and the difference between what is owned (assets) and what is owed (liabilities) called owners' equity

Income statement

reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common

Statement of cash flows

reports the amount of cash collected and paid out by a company in operating, investing, and financing activities

Statement of retained earnings

shows the accumulated profits or losses of a business at a point in time

Form 10-K

a form required by the SEC for businesses to report a comprehensive summary of financial performance, including the three primary financial statements. Filed annually

Form 10-Q

quarterly financial reports that publicly traded companies must file with the SEC

Common assets

cash, accounts receivable, inventory, buildings

Common liabilities

accounts payable, taxes payable, mortgage payable, unearned revenue

Sources of owners' equity

capital stock (the amount given by shareholders to obtain shares of stock from a company, retained earnings.

Liquid

assets that are in the form of cash or can be easily converted into cash

Illiquid

assets that take time and effort to convert into cash

Classified balance sheet

a balance sheet that distinguishes between current and long term assets

Current assets

include cash and other assets that are expected to be converted to cash within a year

long term assets

property and equipment

current liabilities

obligations expected to be satisfied within a year

Long-term liabilities

obligations not expected to be satisfied within a year, such as a mortgage

Comparative financial statements

financial statements that include information for both the current year and preceding year(s) that are prepared for users to identify significant changes in particular items

Market value

the price that would have to be paid to buy the same asset today

Book value

the value of a company measured by the owner's equity of the company

Gross profit

the difference between sales and cost of goods sold

Operating income

reports the results of what a company does on a daily basis, or its operations

Net income

operating income minus interest expense and taxes

Operating activities

activities that are part of the day-to-day business of a company. Selling goods or providing services, payments to purchase inventory and pay wages, taxes, interest, utilities, rent, and similar expenses

Investing activities

those activities associated with buying and selling long term assets - primarily the purchase and sale of land, buildings, and equipment

Financing activities

those activities whereby cash is obtained from or repaid to owners and creditors. Example - cash received from owners' investments. Cash proceeds from a loan or cash payments to repay loans would all be financing activities

Articulation

the relationship between an operating statement (income statement or statement of cash flows) and comparative balance sheets, whereby an item on the operating statement helps explain the change in an item on the balance sheet from one period to the next