Financial statements

Stakeholders

* stakeholders are those people or groups who are impacted by the activities of an enterprise
* an enterprise will aim to do right by all of their stakeholders

Financial interests

* debtors (people who owe and enterprise funds)
* creditors (people owed funds by an enterprise)
* investors (people who lend an enterprise funds)
* shareholders (dividends may be paid on shares)
* government (who collect corporation tax)
* employees (who’s jobs rely on enterprise health)
* suppliers (in order to provide credit)
* customers (who want guarantees and delivery)

profits and losses

* a profit and loss account shows the revenue and expenses for an enterprise over a given period of time, usually a year
* it helps an enterprise to assess its profitability

gross profit equation

gross profit = revenue - cost of sales

revenue deffinition

how much money an enterprise has generated

revenue equation

revenue = sales x price

cost of sales deffinition

the direct costs involved in making or buying products

expenses definition

costs which are not directly involved in the making of the products

total expenses definition

the sum of all expenses

net profit equation

net profit = gross profit - expenses

net profit definition

the overall profit before tax. if the figure is negative is, brackets are put around the figure

ways to improve gross profit

* increase price
* reduce cost of sales
* increase sales volume

ways to improve net profit

* reduce expenses

balance sheet

* a balance sheet shows a financial snapshot of the assets and liabilities of an enterprise
* this snapshot is usually taken on the last day in the financial year
* it helps and enterprise to see the value of the assets it holds and what liabilities is has
* is also helps and enterprise to see how it finances its activities

components of a balance sheet

* fixed assets - long term items an enterprise owns
* current assets - owned items and monies due in that are expected to be sold, used or collected in the next year
* current liabilities - debts that must be paid within one year
* working capital - the ability of an enterprise to pay its debts
* long term liabilities - due over more than one year

working capital equation

working capital = current assets - current liabilities

Equity

* equity is what value is left in an enterprise after liabilities are deducted from the value of its assets
* it represents the total value of an enterprise if they liquidated everything and paid off all their debt
* equity should balance with the net assets

Net assets (equity) equation

net assets = total assets - current liabilities