Balance Sheet – Part 1

While the income statement is a tally of revenue and expenses over a period of time, a balance sheet is a snapshot of the current financial standing.

Below is a sample balance sheet.  It is part of a larger working financial model.

To keep it simple, the example includes basic line items including:

Current Assets
Cash
Account Receivable
Inventory
Prepaid Expenses
Total Current Assets
Long Term Assets
Plant, Property & Equipment, Gross
Accumulated Depreciation
Plant, Property & Equipment, Net
Total Long Term Assets
Total Assets
Current Liabilities
Account Payable
Accrued Expenses
Total Current Liabilities
Long Term Liabilities
Long Term Debt
Total Long Term Liabilities
Total Liabilities
Shareholder’s Equity
Common Equity
Retained Earnings
Total Shareholder’s Equity

 

 

Income Statement aka Profit Loss Statement

Income statement also know as a profit and loss statement is the main financial statement.
It covers revenues and expenses for the company.

Revenue:
  Sales
- Cost of goods sold
= Gross profit

Expenses:
- Salary
- Rent
- Utilities

= Operating Income/(Loss) - aka EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

- Depreciation
- Amortization
= EBIT (Earnings before Interest and Taxes)

- Interest
= EBT (Earning before Taxes)

- Taxes
= Net Income aka Earnings

Operating Income is also known as EDITDA.
EBITDA is a very common term used when talking about a company especially for valuation.
EBITDA is a good proxy for overall health of the company without knowing the full details because it looks at the operating functions of the company and ignores the capital structure of the company.

For sake of simplicity, I’ve ignore dividends and stock expense and other usually immaterial line items.

This is just the basics, we’ll dive into more detail in later posts.

Check out our sample profit and loss statement below.  It is fully downloadable in Microsoft Excel.