Financial management Summary:
Chapter 3 - Financial statements
3.1 Investment and financing:
Assets: The resources a company invests in.
Fixed assets: either tangible or intangible, can serve a business over a long period of time
(longer than one year).
Current assets: are present in a business less than a year. They also include
Equity: Capital provided by the owner(s) for an unlimited period of time; reimbursement
depends on the profit.
Liabilities: Financial resources provided by creditors for a limited period of time. Usually,
compensation is fixed.
Liabilities and equity: Financial resources of the company, comprising debts and or equity.
The difference between equity and liabilities:
3.2 Balance sheet and income statement:
Balance sheet: Overview with the value of all assets a company invested in on one side and the
financial resources used to acquire these assets on the other side. (Assets vs. Liabilities)
Example of a balance sheet:
, Income statement: Overview of the sales and expenses during a period. (Costs vs. revenues).
- Costs: Expenses incurred to generate the revenues. (Are not always equal to the cash
outflows).
- Revenues: entitlement to a sum of money due to the delivery of good and services.
Regardless of when the actual payment has been placed.
Sales: sales are assigned to the period during which the company delivered and invoiced goods
or services to the customer, regardless of whether the delivery of these goods or services
resulted in payment during that period. (Do not necessarily have to coincide with the cash
inflows).
The repayment of debts are not included in the income statement as they do not change
equity.
Example Income statement:
3.3 Profit versus cash flow:
Cash flow statement consists out of all the cash inflow and the cash outflow.
Differences between sales/cost and the cash inflows/outflows:
Chapter 3 - Financial statements
3.1 Investment and financing:
Assets: The resources a company invests in.
Fixed assets: either tangible or intangible, can serve a business over a long period of time
(longer than one year).
Current assets: are present in a business less than a year. They also include
Equity: Capital provided by the owner(s) for an unlimited period of time; reimbursement
depends on the profit.
Liabilities: Financial resources provided by creditors for a limited period of time. Usually,
compensation is fixed.
Liabilities and equity: Financial resources of the company, comprising debts and or equity.
The difference between equity and liabilities:
3.2 Balance sheet and income statement:
Balance sheet: Overview with the value of all assets a company invested in on one side and the
financial resources used to acquire these assets on the other side. (Assets vs. Liabilities)
Example of a balance sheet:
, Income statement: Overview of the sales and expenses during a period. (Costs vs. revenues).
- Costs: Expenses incurred to generate the revenues. (Are not always equal to the cash
outflows).
- Revenues: entitlement to a sum of money due to the delivery of good and services.
Regardless of when the actual payment has been placed.
Sales: sales are assigned to the period during which the company delivered and invoiced goods
or services to the customer, regardless of whether the delivery of these goods or services
resulted in payment during that period. (Do not necessarily have to coincide with the cash
inflows).
The repayment of debts are not included in the income statement as they do not change
equity.
Example Income statement:
3.3 Profit versus cash flow:
Cash flow statement consists out of all the cash inflow and the cash outflow.
Differences between sales/cost and the cash inflows/outflows:
