Cash Assets

Non Cash assets

contributed Capital

retained earnings

Contributed Capital

Retained earnings

Cash inflow for stock issued

cash outflow for dividends

net income

Cash Assets

Cash outflow for capital expenditures

cash inflow for stock issued

cash outflow for dividends

net income

Net Income/

Equity(from beginning of time frame) plus Equity (from end of time frame) divided by 2

Net Income/

Total Assets (from beginning of time frame) plus Total Assets (from beginning of Time frame) divided by 2

Net income/average assets

Net incoem/average assets

OR

(profitability) Net income/sales

multiplied by

(productivity) Sales/ Average Assets

Costs - Capitalized (assets yet to be expensed)

Costs - Not Capitalized (expenses)

• Cash—currency, bank deposits, and investments with an original maturity of 90 days or less (called cash equivalents);

• Marketable securities—short-term investments that can be quickly sold to raise cash;

• Accounts receivable, net—amounts due to the company from customers arising from the sale of products and services on credit (“net” refers to uncollectible accounts explained in Module 6);

• Inventory—goods purchased or produced for sale to customers;
• Prepaid expenses—costs paid in advance for rent, insurance, advertising or other services.

• Property, plant and equipment (PPE), net—land, factory buildings, warehouses, office buildings, machinery, motor vehicles, office equipment and other items used in operating activities (“net” refers to subtraction of accumulated depreciation, the portion of the assets’ cost that has been transferred from the balance sheet to the income statement, which is explained in Module 6);

• Long-term investments—investments that the company does not intend to sell in the near future;

• Intangible and other assets—assets without physical substance, including patents, trademarks, franchise rights, goodwill and other costs the company incurred that provide future benefits.

• Accounts payable—amounts owed to suppliers for goods and services purchased on credit.
• Accrued liabilities—obligations for expenses that have been incurred but not yet paid; examples are accrued wages payable (wages earned by employees but not yet paid), accrued interest payable (interest that is owing but has not been paid), and accrued income taxes (taxes due).
• Unearned revenues—obligations created when the company accepts payment in advance for goods or services it will deliver in the future; also called advances from customers, customer deposits, or deferred revenues.
• Short-term notes payable—short-term debt payable to banks or other creditors.
• Current maturities of long-term debt—principal portion of long-term debt that is due to be paid within one year.

• Contributed Capital (cash raised from the issuance of shares

• Earned capital (retained earnings).  Retained earning is updated each period. 

From Profit to shareholders

(Profit is on income statement)

Assets bigger?  Cash smaller

Assets Smaller?  Cash Bigger

Liabilities bigger? Cash Bigger

Liabilities smaller?  Cash smaller