7.2 Slides - Financial Figures & Statements

Asset

Any item of value owned by a business that contributes to revenue, can be current (liquid) or non-current (illiquid), and can also refer to a person who is valuable to the business.

Current Asset

An asset that can be easily converted to cash in less than a year, examples include cash, finished goods, and accounts receivable.

Non-current Asset

An asset that cannot be easily turned into cash in more than a year, examples include buildings, raw materials, and aging receivables.

Liability

Either a debt owed to another party or a risk for which one is responsible, can also describe a person who poses a threat or risk.

Net Worth

The value of assets owned minus the liabilities owed, also known as owner’s equity, representing what owners would receive if the business were liquidated and debts paid.

Debt-to-Equity Ratio (D/E)

Compares a business’s total liabilities with its owner���s equity, a high ratio indicates higher risk to investors and lenders.

Pro Forma Statements

Standardized documents used to analyze a business’s financial performance, including Cash Flow Statement, Income Statement, and Balance Sheet.

Cash Flow

Refers to the cash or cash equivalents available in a business for operations, crucial for business survival and growth.

Income Statement (P&L)

Shows a business’s revenues, expenses, gains, and losses over a specific period, key elements include revenue, COGS, operating expenses, taxes, gross profit, and net income.

Balance Sheet

Lists a business’s assets, liabilities, and owner’s equity, providing a snapshot of the business's financial position.