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Finance For Non-Financial Managers

The document discusses key financial statements that provide information to stakeholders of a company. It explains that financial statements like the income statement and balance sheet communicate how a company has performed over time and what assets and liabilities it holds. The income statement uses accrual accounting to record revenues when earned and expenses when incurred, rather than when cash is received or paid. This helps stakeholders assess the company's profitability and financial position.

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rafiquemuhammadayub
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59 views15 pages

Finance For Non-Financial Managers

The document discusses key financial statements that provide information to stakeholders of a company. It explains that financial statements like the income statement and balance sheet communicate how a company has performed over time and what assets and liabilities it holds. The income statement uses accrual accounting to record revenues when earned and expenses when incurred, rather than when cash is received or paid. This helps stakeholders assess the company's profitability and financial position.

Uploaded by

rafiquemuhammadayub
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FINANCE FOR NON-FINANCIAL

MANAGERS Muhammad Ayub


WHAT DO FINANCIAL STATEMENTS
TELL US AS A STAKEHOLDER?

Loan
Customer Investors
provider
Tax
Potential
Employee Authoritie
Buyer
s
INTRO

Beginning of the month


Performance: How has a
and at the end of the
company performed over
month? Bi-Annually or
a period of time?
Annually?

How to measure
performance?
POSITION

Position =Destination: In terms of Assets and


Assets: You Owns
Where we arrived! Liabilities

total value of a company's


Assets+Liabilities=Financia
Liabilities: You Owe assets is equal to the total
l Position
value of its liabilities
LIQUIDITY
How much
How much cash future cash do
do we have we have to
payout, now? survive in the
mid-term?
For example A
company needs
to pay bills,
wages etc,
Performance
Profit and Loss Account, Small and Medium Enterprises
Income Statement, Large companies contain multiple sources
of income such as Capital gains on stocks and commodities
Income and Expenditure Statement; Public Sector companies
Management Accounts

STATEMENT
TERMINOLOGY
STATEMENT
TERMINOLOGY
Position
Balance Sheet
What are your assets and liabilities by the year-
end?
It is like a financial photo of your company: It
shows assets and liabilities and can be produced
whenever you want to check on financial health.
It is also known as a statement of financial position
STATEMENT TERMINOLOGY
Liquidity
Cash Flow Statement
Cash coming in and cash going out
PROFIT AND LOSS ACCOUNT
Reflects: Financial Performance
Measures: Income and Expenditures over a certain period of time
Uses: Accrual Basis of Accounting
ACCRUAL BASIS OF ACCOUNTING
Relevant to profit and loss

Income is recorded in accounts when it is “Earned”

Expenses are recorded in accounts when they are “Incurred”

Example: Charlie started the plumbing business in 2021: during the first month(1st
January 2021) following happened:
He rented a lock-up for 3 months to 31st March for $900. He paid in full on 2nd March.

He also rented a van for a year from 1st January. His payment of $200 was due on 2nd
February.
He agreed to install a bathroom for $4000 for his customer and finished the job on the
29th of January.
He paid the wholesaler $2200 for material on 11th January.

He paid $50 for digital Ads.


ACCRUAL PRINCIPLE: CHARLIE STARTED THE
PLUMBING BUSINESS IN 2021: DURING THE FIRST
MONTH(1 ST JANUARY 2021) FOLLOWING
HAPPENED:
Cash Flow $ Profit and Loss Account $
Cash Received 0 Revenue 4000

Cash Paid Cost of Sales 2200

Purchased for sale - 2200 Gross Profit 1800


Overheads
Petrol -100
Fuel 100
Lock up rentals -900
Van rentals 200
Van rentals 0
Marketing 50
Digital Ads -50
Profit 1150
Net Cash Paid -3250
THE BALANCE
SHEET
Why the Balance Sheet?
Jemima is an Antique dealer
THE CASH FLOW STATEMENT

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