Chapter 16 - How to read, analyze, and interpret financial reports. In this chapter, the learning objectives are: Explain the purpose and the key items on the balance sheet, explain and complete vertical and horizontal analysis, explain the purpose and the key items on the income statement, explain and complete vertical and horizontal analysis. | Chapter 16 How to Read, Analyze, and Interpret Financial Reports Explain the purpose and the key items on the balance sheet Explain and complete vertical and horizontal analysis How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Balance Sheet -- Report as of a Particular Date Explain the purpose and the key items on the income statement Explain and complete vertical and horizontal analysis How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Income Statement -- Report for a Specific Period of Time Explain and complete a trend analysis List, explain, and calculate key financial ratios How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Trend and Ratio Analysis Accounting Equation Accounting Equation: Assets = Liabilities + Owner’s Equity Balance Sheet Gives a financial picture of what a company is worth as of particular date. Assets Liabilities + . | Chapter 16 How to Read, Analyze, and Interpret Financial Reports Explain the purpose and the key items on the balance sheet Explain and complete vertical and horizontal analysis How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Balance Sheet -- Report as of a Particular Date Explain the purpose and the key items on the income statement Explain and complete vertical and horizontal analysis How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Income Statement -- Report for a Specific Period of Time Explain and complete a trend analysis List, explain, and calculate key financial ratios How to Read, Analyze, and Interpret Financial Reports #16 Learning Unit Objectives Trend and Ratio Analysis Accounting Equation Accounting Equation: Assets = Liabilities + Owner’s Equity Balance Sheet Gives a financial picture of what a company is worth as of particular date. Assets Liabilities + Owner’s Equity = How much the company owns How much the owner is worth How much the company owes Figure - Elements of the Balance Sheet MOOL COMPANY Balance Sheet December 31, 2011 Assets Liabilities a. Current assets: a. Current liabilities: b. Cash $ 7,000 b. Accounts payable $ 80,000 c. Accounts receivable 9,000 c. Salaries payable 12,000 d. Merchandise inventory 30,000 d. Total current liabilities $ 92,000 e. Prepaid expenses 15,000 e. Long-term liabilities: f. Total current assets $61,000 f. Mortgage note payable 58,000 g. Plant and equipment: g. Total liabilities $150,000 h. Building (net) $60,000 i. Land 84,000 Stockholders Equity j. Total plant and equipment 144,000 a. Common stock $ 20,000 b. Retained earnings 35,000 c. Total stockholders equity 55,000 k. Total assets $205,000 d. Total liab. and stkhlds equity $205,000 Assets broken down into current assets and plant and equipment. Liabilities broken down into current and long-term Total of current assets and plant and
