Presentation on theme: "Understanding a Financial Statement"— Presentation transcript:
1 Understanding a Financial Statement Horticulture 2Essential 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 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.
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 isDebt-to-Equity Ratio = total liabilities/net worth.
7 F. 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 Depreciable- items that have a useful life of more than one year and lose value because of age, wear or becoming out-of-date because of technology advancements.3.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.
8 RECORDS 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.
9 Item 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
10 Non-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=