ADVANCED FINANCIAL MANAGEMENT

FINANCIAL STATEMENT

G.N. Sandhy Widyasthana

[email protected]
    sandhy_widyasthana
 Financial Statements
❖ Financial statements provide an overview of a business or person's
nancial condition in both short and long term. All the relevant
nancial information of a business enterprise, presented in a
structured manner and in a form easy to understand, are called the
nancial statements. There are four basic nancial statements:
1. Balance sheet
2. Income statement
3. Equity Statement
4. Statement of cash ow
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 1. Balance Sheet
❖ Balance sheet: referred to as statement of nancial position
or condition, reports on a company's assets, liabilities, and
net equity as of a given point in time.
❖ Another de nition: is an accountant snapshot of the rms
accounting value on a particular date, as through the rm
stood momentarily still.
❖ The balance sheet shows what assets the rm controls at a
point in time and how it nanced the assets.
❖ Assets= Liabilities + owners equity
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 Balance Sheet
❖ Assets are economic resources that are expected to produce economic
bene ts for their owner.
❖ Liabilities are obligations the company has to outside parties.
Liabilities represent others' rights to the company's money or
services. Examples include bank loans, debts to suppliers and debts
to employees.
❖ Shareholders' equity is the value of a business to its owners after all
of its obligations have been met. This net worth belongs to the
owners. Shareholders' equity generally re ects the amount of capital
the owners have invested, plus any pro ts generated that were
subsequently reinvested in the company. 
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 Balance Sheet
❖ Assets ❖ Liabilities

❖ Cash in hand ❖ Accounts Payable

❖ short term loans
❖ Cash in bank
❖ Bank over draft
❖ Account Receivables
❖ Notes payable
❖ Notes receivables
❖ current term liabilities
❖ Total Inventory( raw materials, nished ❖ Long Term Loans,
goods, spare parts)
❖ Equity
❖ Total Current Assets
❖ Owner's Equity
❖ Land, Plant, Equipment and Furniture ❖ Capital
❖ (-)Accumulated Depreciation ❖ +Net pro t or – net loss
❖ Total xed Assets ❖ (-)drawing
❖ Total assets ❖ Total Liabilities and Equity
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Example of Balance Sheet
 2. Income Statement
❖ Income statement: also referred to as Pro t and Loss
statement reports on a company's income, expenses, and
pro ts over a period of time. Pro t & Loss account
provide information on the operation of the enterprise.
These include sale and the various expenses incurred
during the processing state.
❖ The income statement indicates the ow of sales,
expenses, and earnings during a period of time.
❖ Revenues- Expenses= Income
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 Income Statement
❖ Sales Revenue
❖ (-)Cost of Goods Sold (COGS)
❖ Gross Pro t ( the real activity of the company)
❖ (-)Operating Expenses
❖ (-)Depreciation
❖ (-)General and Administrative Expenses
❖ (-) maintenance
❖ (-) bad debt
❖ Earnings Before Interest and Taxes (EBIT)
❖ (-)Interest ( 10%------ 16%)
❖ Earnings Before Taxes (EBT)
❖ (-)Taxes ( 40%)
❖ Net Income (Loss)
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Example of Income Statement
 3. Equity Statement

❖ The statement of owner's equity reports the changes in

company equity, from an opening balance to and end of
period balance. The changes include the earned pro ts,
dividends, in ow of equity, withdrawal of equity, net
loss, and so on.
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Example of Equity Statement
 4. Statement of Cash Flows
❖ Statement of cash ows: reports on a company's cash ow activities,
particularly its operating, investing and nancing activities.
❖ This statement helps to explain the change in accounting cash and equivalents.
❖ The statement of cash ows shows the effect on the rm's cash ows of
earnings and changes in the assets, current liabilities, long-term liabilities and
net worth.
❖ Cash in ow- cash out ow = net Cash ow
❖ The statement of cash ow reports the impact of a rm's operating, investing
and nancial activities on cash ows over an accounting period. The cash ow
statement is designed to convert the accrual basis of accounting used in the
income statement and balance sheet back to a cash basis.
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 Cash Flow Sources
❖ Cash Flow from Operating Activities (CFO)
❖ Cash in and cash out from transaction that effects to net
income
❖ Cash Flow from Investing Activities (CFI)
❖ Cash in and cash out from acquisition or selling of long
term asset and special investment
❖ Cash Flow from Financing Activities (CFF)
❖ Cash in and cash out that affect company equity structure
 Operating Activity
❖ Input
❖ Cash from customer
❖ Cash from Interest and Dividend
❖ Cash from securities trading
❖ Output
❖ Payment to supplier or employee
❖ Payment for other liability
❖ Trading securities acquisition
❖ Interest payment
❖ Tax payment
 Investing Activity
❖ Input
❖ Selling xed asset
❖ Selling investment, bond and equity
❖ Payment loan from other company
❖ Output
❖ Fixed asset acquisition
❖ Investment, bond and security acquisition
❖ Loan to other party
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 Financing Activity
❖ Input
❖ The principal value of the bond issued
❖ Result from share issuance
❖ Output
❖ Payment of long term loan principal
❖ Buying treasury stock
❖ Paying dividend to shareholder
 Cash Flow
❖ Cash In
❖ Sales
❖ Loans
❖ Total Cash In
❖ Cash Out
❖ Investment Costs
❖ Operating Expenses
❖ Repayment of Loans
❖ Installments
❖ Interests
❖ Taxes
❖ Buying new xed assets
❖ Total Cash Out
❖ Net Cash Flow
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 Free Cash Flow
❖ Free Cash Flow to The Firm
❖ Cash available for all investor include equity or bond owners
❖ FCFF = net income + non cash charges + [interest expense x (1 - tax rate)]
- xed capital investment - working capital investment
❖ FCFF = CFO + [interest expense x (1 - tax rate)] - xed capital investment
❖ Free Cash Flow to Equity
❖ Cash available for ordinary share holder after all liabilities have been
settled
❖ FCFE = CFO - xed capital investment + net borrowing
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Example of Statement of Cash Flows