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Understanding a Financial Statement Horticulture 2 Essential Standard 2.02.

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Presentation on theme: "Understanding a Financial Statement Horticulture 2 Essential Standard 2.02."— Presentation transcript:

1 Understanding a Financial Statement Horticulture 2 Essential Standard 2.02

2 A. 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.

3 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. 2.Non-current liabilities- mortgages and other debts not due this year.

4 C. Net worth or owner’s equity = total assets minus total liabilities.

5 D. 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 is Debt-to-Equity Ratio = total liabilities/net worth.

6 E. Value- monetary worth.

7 F. Inventory- an itemized list of things owned by a business with the beginning value and depreciated value. 1.Non-depreciable- items that will be used up or sold within 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 Depreciable- items that have a useful life of more than one year and lose value because of age, wear or becoming out-of-date because of technology advancements. 3.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.

8 RECORDS WORKSHEET Instructions: 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.

9 Item Current/Non- current Asset or Liability ValueTotal Value Electric bill $278/month Dodge Viper car payment $660/month 26 acres of land valued at $7,000/acre Tax appraised value of home: $450,000 Thoroughbred racehorse value: $600,000 IRA: $25,000 Personal Trainer: $350/month Water Bill: $80/month German Shepherd: $1,000 Cell phone bill: $120/month

10 Mortgage payment: $854/month Mortgage payoff: $230,000 Horse boarding bill: $550/month Pet Groomer: $30/month Cable bill: $80/month Value of Dodge Viper: $67,000 Checking Account Balance: $3,456 Savings Account: $6 Current Assets=Current Liabilities= Non-current Assets=Non-current Liabilities= Total Assets=Total Liabilities= Net Worth= Balance Sheet

11 Let’s Check Our Work!!!

12 Item Current/Non- current Asset or Liability ValueTotal Value Electric bill $278/month Current liability278/month336/yr. Dodge Viper car payment $660/month Current liability660/month7920/yr. 26 acres of land valued at $7,000/acre Non-current asset7,000/acre182,000 Tax appraised value of home: $450,000 Non-current asset450,000 Thoroughbred racehorse value: $600,000 Non-current asset6000,000600,000 IRA: $25,000 Non-current asset25,000 Personal Trainer: $350/month Current liability350/month4,2000/yr. Water Bill: $80/month Current liability80/month960/yr. German Shepherd: $1,000 Non-current asset1,000 Cell phone bill: $120/month Current liability120/month1440/yr.

13 Mortgage payment: $854/month Current liability854/mo.10,248/yr. Mortgage payoff: $230,000 Non-current liability230,000 Horse boarding bill: $550/month Current liability550/month6,600/yr. Pet Groomer: $30/month Current liability30/month360/yr. Cable bill: $80/month Current liability80/month960/yr. Value of Dodge Viper: $67,000 Non-current asset67,000 Checking Account Balance: $3,456 Current asset3,456 Savings Account: $6 Current asset66 Current Assets= $3462Current Liabilities= $36,024 Non-current Assets= $1,325,000 Non-current Liabilities= $230,000 Total Assets= $1,328,462Total Liabilities=$266,024 Net Worth= $1,062,438 Balance Sheet


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