- Creditors

- Regulatory agencies

- Governments

- Stockholders

These are internal reports for how well the company is doing, and for planning for the future

- Months, quarters, or years

- Publically traded companies must repair reports quarterly and annually (according to SEC)

- Fiscal year is January through December

 (Rite Aid does April 1st through March 31st)

- Income Statement (Sales, expenses, profits or losses over a period of time)

- Balance sheet (assets, liabilities, owner's equity)

- Cash flow statement (where the cash comes from and how it's been spent)

- What a company owns, uses to produce revenues

Sources of assets are equities.  There are two subcategories of this

- Liabilities - debts that a company owns

- Owner's Equity - Money owners' invested in the company, profits and losses generated from the business

- If only revenue and no expenses, INCREASE in owner's equity

- If only expenses, DECREASE owner's equity

- Profits INCREASE owner's equity

- Losses DECREASE owner's equity

- Equation remains in balance.  Profit and loss added to the right side of the equation is the same as increase or decrease in assets

- Summary of information that reflects the solvency of the business

- Illustrates what is owned (assets) and owed (liabilities)

- Net balance belongs to owners or shareholders (owner's equity) 

Cash - CD's, cash value of stocks and bonds

Notes receivable - Written agreement from another party to pay the business

Accounts Receivable - Goods or services sold on the basis of oral or implied promises of future payment.  Credit card sales, third party are examples

Current - Cash, accounts receivable, inventory - converted quickly

Long Term - Fixtures, equipment

Other - Prepaid expenses (paying off a year of insurance)

- Obligations the business has to pay for, assets it has obtained

- Bank loans, mortgages, credit from wholesalers, wages due to employees

- Two kinds are current liabilites or long term liabilites

Current - Due to be paid during next accounting cycle

Long Term - Due later than 1 year

- At the end of each cycle, a portion of long-term liabilities are transferred to current liabilities

Accounts payable - owed to a creditor

Notes payable - loans to finance assets

Mortgage payables

Accrued Wages

Unearned Revenues - We owe Price Chopper for something they have not done yet

- What belongs to the owners after all liabilities have been paid

Examples:  Retained earnings - profits not distributed to shareholders.  Dividends - payments paid to shareholders, typically on a quarterly basis

- All of the sales and expenses of the business over a period of time, illustrates profitability (able to produce enough in sales to cover all expenses)

Total Sales - Sum of all sales revenues earned

Cost of goods sold (COGS) - Cost of goods sold to consumers

Gross Margin - Amount of money available to pay for all expenses and taxes and yeild a profit  = total sales - COGS

- Inflows and outflows of cash

- No direct relationship between level of cash and profitability

- Similar to a checkbook

- Differences between inflows and outflows is known as cash balance

 - Used to examine an organization's financial performance

- Used to check profitability, liquidity, turnover

- Used to make comparisons between single org. and industry, differences over time, two or more units in an org. or two or more organizations to each other. 

- Measures of overall success in daily operations

- Overall financial success of a company

- Ability to generate gross profits

- = (Sales - COGS)/ Total Sales

- How well an organization manages its operating expenses

- Compare two or more pharmacies in a chain

- = Net income (after tax)/ Total Sales

- Ability to generate profits using a company's assets

- Effective use of assets - high ROA

- = net income/average total assets

- How well a company can make profits from funds provided by investors owners

- High ROE levels are desirable

-  = net income/ average owner's equity

- Current assets to current liabilities

- = current assets / current liabilities

- What does it say if the CR is > 5? Too conservative

- If CR is < 2? Can't pay bills

- Considers assets readily converted to cash

- Better picture

-  = (current assets - inventories - prepaid expenses)/current liabilities

- Should be at least 1.0

- If greater, more quick assets than current liabilities

- How quickly an organization's inventory is sold

- = COGS/average inventory

- Highest rates are desirable to a point

- If low ratio, inventory is too larage

- Higher rates desirable to a point, won't be able to keep things in stock

- How quickly receivables are turned into cash

- = credit sales/average accounts receivable

- RTO/365 = average collection period - critical when one considers third party payers

- The higher the better

- Want you sales to be higher than the amount of money you are waiting for

- Generated daily through most computer systems

- Is a report that tells you who owes you what by third party plan

- Identifies plan with low reimbursement (they take out a 3-4% admin. cost)

- Same goes with charge cards