Basic finances for dummies how to#
Basic finances for dummies movie#

Noncurrent assets are things a company does not expect to convert to cash within one year or that would take longer than one year to sell. Most companies expect to sell their inventory for cash within one year. Current assets are things a company expects to convert to cash within one year. Sometimes balance sheets show assets at the top, followed by liabilities, with shareholders’ equity at the bottom.Īssets are generally listed based on how quickly they will be converted into cash. On the right side, they list their liabilities and shareholders’ equity.

On the left side of the balance sheet, companies list their assets. The following formula summarizes what a balance sheet shows:ĪSSETS = LIABILITIES + SHAREHOLDERS' EQUITYĪ company's assets have to equal, or 'balance,' the sum of its liabilities and shareholders' equity.Ī company’s balance sheet is set up like the basic accounting equation shown above. This leftover money belongs to the shareholders, or the owners, of the company.

It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities. Shareholders’ equity is sometimes called capital or net worth. Liabilities also include obligations to provide goods or services to customers in the future. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, rent for use of a building, money owed to suppliers for materials, payroll a company owes to its employees, environmental cleanup costs, or taxes owed to the government. Liabilities are amounts of money that a company owes to others. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents. Assets include physical property, such as plants, trucks, equipment and inventory. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Let’s look at each of the first three financial statements in more detail.Ī balance sheet provides detailed information about a company’s assets, liabilities and shareholders’ equity.Īssets are things that a company owns that have value. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders over time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. Income statements show how much money a company made and spent over a period of time. Balance sheets show what a company owns and what it owes at a fixed point in time. They are: (1) balance sheets (2) income statements (3) cash flow statements and (4) statements of shareholders’ equity. There are four main financial statements. They show you where a company’s money came from, where it went, and where it is now.

Basic finances for dummies movie#

We all remember Cuba Gooding Jr.’s immortal line from the movie Jerry Maguire, “Show me the money!” Well, that’s what financial statements do. Let’s begin by looking at what financial statements do. It will not train you to be an accountant (just as a CPR course will not make you a cardiac doctor), but it should give you the confidence to be able to look at a set of financial statements and make sense of them.

Basic finances for dummies how to#

Just as a CPR class teaches you how to perform the basics of cardiac pulmonary resuscitation, this brochure will explain how to read the basic parts of a financial statement. This brochure is designed to help you gain a basic understanding of how to read financial statements. The basics aren’t difficult and they aren’t rocket science. If you can follow a recipe or apply for a loan, you can learn basic accounting. If you can read a nutrition label or a baseball box score, you can learn to read basic financial statements.