Simple financial statements

• Income Statement


  Shows the profitability of a business by deducting income from expenses
• Balance Sheet


  Assesses the financial position of a business by showing what it owns and what it owes
• Analyzing the Income Statement and Balance Sheet


  Can assist in determining the performance, financial position and Liquidity of a business for a period of time
• Business performance


  Determined by its profitability
• Profit


  Indicates good performance
• Loss


  Suggests poor performance
• Business performance


  Reflected in the Balance Sheet
• Balance Sheet


  • Shows the financial strength of the owner's capital investment
  • Indicates financial position through liquidity (current assets greater than current liabilities)
• If assets exceed Liabilities this is a probably indicator of financial strength
• Where current assets are greater than current liabilities a business will have the ability to pay back their short term debts as this will show a strong cash position