Main Finance Statements and Steps in Performing Accounting Analysis
Financial information and firm performance
Accounting and financial statement analysis
Paulo Alves & Joana Fontes (2014/2015)
Topics for this session
Review of main financial statements
Steps in performing accounting analysis
Case study: Euro Disney and the first five steps of accounting analysis
2
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Review of main financial statements
3
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Income statement
Provides a summary of the revenues
(increases in economic benefits) and expenses (decreases in economic benefits) over a period of time
EXAMPLE Inc. – Income Statement / April 30, 2013
Provides information about the firm’s performance, showing whether the firm was profitable over the period
Net income = Revenues – Expenses
4
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Balance sheet or Statement of financial position
Provides information about the economic resources controlled by the firm (Assets) which is useful to estimate firm’s ability to generate future cash flows
Provides information about the firm’s financial structure (Liabilities and Equity) which is useful to:
◦ predict future finance needs and earnings distributions
◦ predict firm’s ability to repay its liabilities according to agreed terms
5
Net assets = Equity
Assets = Liabilities + Equity
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Statement of changes in equity
Provides a summary of the contributions and distributions to equity holders and the comprehensive income of the year;
6
EXAMPLE Inc. – Retained Earnings / April 30, 2013
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Statement of cash flow
Provides a summary of cash coming in (+) and cash going out during period, by type of activity:
EXAMPLE Inc. – Retained Earnings / April 30, 2013
◦ Operating activities
◦ Investing activities
◦ Financing activities
Provides information about
Accounting and financial statement analysis
Paulo Alves & Joana Fontes (2014/2015)
Topics for this session
Review of main financial statements
Steps in performing accounting analysis
Case study: Euro Disney and the first five steps of accounting analysis
2
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Review of main financial statements
3
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Income statement
Provides a summary of the revenues
(increases in economic benefits) and expenses (decreases in economic benefits) over a period of time
EXAMPLE Inc. – Income Statement / April 30, 2013
Provides information about the firm’s performance, showing whether the firm was profitable over the period
Net income = Revenues – Expenses
4
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Balance sheet or Statement of financial position
Provides information about the economic resources controlled by the firm (Assets) which is useful to estimate firm’s ability to generate future cash flows
Provides information about the firm’s financial structure (Liabilities and Equity) which is useful to:
◦ predict future finance needs and earnings distributions
◦ predict firm’s ability to repay its liabilities according to agreed terms
5
Net assets = Equity
Assets = Liabilities + Equity
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Statement of changes in equity
Provides a summary of the contributions and distributions to equity holders and the comprehensive income of the year;
6
EXAMPLE Inc. – Retained Earnings / April 30, 2013
Joana Cardoso Fontes & Paulo Alves (2014/2015)
Statement of cash flow
Provides a summary of cash coming in (+) and cash going out during period, by type of activity:
EXAMPLE Inc. – Retained Earnings / April 30, 2013
◦ Operating activities
◦ Investing activities
◦ Financing activities
Provides information about