Introduction to Financial Ratios

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the: 

• Balance Sheet
• Statement of Retained Earnings
• Statement of Cash Flows
• Income Statement

The income statement can be expressed as an equation:

• Income =Income-Expenses
• Revenue-Expenses = Net Income (Loss)
• Revenue + Expenses = Income/Loss
• Expenses = Net Income + Revenue

Examples may include salaries, utilities, rent, insurance, and office supplies.

• Revenue
• Expense
• Net Income
• Net Loss

The sources of money generated by the sale of products or services.

• Revenue
• Expenses
• Net Income
• Net Loss

This document communicates what the entity owns in terms of assets, what it owes in the terms of liabilities, and the difference between those two which represents what the owners o the company are entitled to.

• Income Statement
• Balance Sheet

What a company owes to creditors:

• Assets

• Liabilitites

• Equity

Assets = Liabilities + Equity

• Balance Sheet
• Income Statement

What are assets?

• What a company owns; anything of value owned by a business.
• Costs of operating a business.
• Detailed plans for the financial needs of individuals, families, and businesses.
• Differences between actual and budgeted performance.  

What are liabilities?

• The money paid to employees.
• Costs of operating a business.
• The act of buy items. 
• What a company owes.

What is owner equity?

• The value of the business after liabilities are subtracted from assets; the value of the owner's investment in the business.
• What a company owes.
• Documents that are used to record and analyze the financial performance of a business.
• All income a company receives overtime.