Presentation on theme: "Understanding a Financial Statement"— Presentation transcript:
1Understanding a Financial Statement Horticulture 2Essential Standard 2.02
2A. Total assets = current assets + non-current assets. 1. Current assets- items that can quickly be converted to cash or that will be sold within 12 months. Examples- cash on hand, checking and savings accounts, stocks, bonds and cash in value of life insurance money others owe you, current non-depreciable inventory.2. Non-current assets- items that have a useful life of more than one year and are used in the business. Examples- non-current, non-depreciable inventory, land.
3B. Total liabilities = current liabilities (debts) + non-current B. Total liabilities = current liabilities (debts) + non-current liabilities (debts).1. Current liabilities- accounts and notes payable, this year’s part of non-current liabilities.Non-current liabilities- mortgages and other debts notdue this year.
4C. Net worth or owner’s equity = total assets minus total liabilities.
5D. Debt-to-Equity Ratio- a measure of a company or individuals net worth compared to the liabilities.Provides an indicator of the debt and equity a company is using to finance assets.Formula used to calculate Debt-to-Equity Ratio isDebt-to-Equity Ratio = total liabilities/net worth.
7F. Inventory- an itemized list of things owned by a business with the beginning value and depreciated value.Non-depreciable- items that will be used up or soldwithin a year.Example: feed, supplies, etc.2. Depreciable- items that have a useful life of more than one year and lose value because of age, wear or becoming out-of-date because of technology advancements.3. Land is NOT depreciable property.
8RECORDS WORKSHEETInstructions: State whether each item is a current liability, non-current liability, current asset, or non- current asset. Give the value of that item and then calculate the total value. Once you have all the values, calculate total assets, total liabilities, and net worth.
9Item Asset or Liability Current/Non- currentAsset or LiabilityValueTotal ValueElectric bill$278/monthDodge Viper carpayment$660/month26 acres of landvalued at$7,000/acreTax appraisedvalue of home:$450,000Thoroughbredracehorse value:$600,000IRA: $25,000Personal Trainer:$350/monthWater Bill:$80/monthGermanShepherd: $1,000Cell phone bill:$120/month
10Non-current Liabilities= Total Assets= Total Liabilities= Net Worth= Mortgagepayment:$854/monthMortgage payoff:$230,000Horse boardingbill: $550/monthPet Groomer:$30/monthCable bill:$80/monthValue of DodgeViper: $67,000Checking AccountBalance: $3,456Savings Account:$6Balance SheetCurrent Assets=Current Liabilities=Non-current Assets=Non-current Liabilities=Total Assets=Total Liabilities=Net Worth=