1. By : Breana Moore Principles Of Business and Finance, Period 02

2. What are Balance Sheets? Balance sheets include: Total Assets and total Liabilities, Owner’s Equity, and the Liabilities plus Owner’s Equity There must be a balance in the two totals of money on each side. Businesses usually make a balance sheet every six months or only once a year. Businesses used these to figure out their overall financial stability.

3.  This balance sheet provides information of the value of their assets (things that they own) and the amount of money that they owe  Owner’s Equity is the total cost of assets subtracted by the total cost of liabilities.  Both sides has an equal balance; the total assets is equal to the total liabilities + owner’s equity  Some balance might have the assets split up as current assets and long-term assets, and the same with liabilities  You do the same steps as you would with the balance sheet above to find the total assets, the liabilities, and owner’s equity Picture- From:www.newthinktank.com, Derek Banas

4. What are Income Statements?  Income Statements include revenue, expenses, and if the business experienced net income or net loss. It is used by businesses to find out if they are gaining money over expenses (what they pay for the business) or not Net income is when the business gains more money than pay Net loss is when the business pays more money (expenses) than what they earn Can cover a six month or twelve month time frame, or less.

5.  This income statement shows that Wal-Mart has a positive amount of money in the net income section, so they are experiencing net profit  This income statement records the net income of January 31 st of both 2009 and 2010. From: www.investinganswers.com, John Persinos Picture-  Helps you determine if your company is experiencing net profit or net loss Net Profit!

6. How to get the Net Income Ratio?  All Sales/ Net Income= Net Income Ratio What about Current Ratio?  All Current Assets/ All Current Liabilities= Current Ratio  Use with information from Income Statements  Use with information from Balance Sheets Positive or negative?  If negative, the company is experiencing net loss. If not, net profit.  There should be an equal or higher amount of assets to liabilities

7. How to get the Return on Equity Ratio Debt to Equity Ratio? o Net Profit/ Owner’s Equity= Return on Equity Ratio What does it indicate? o All Liabilities/ Owner’s Equity= Debt to Equity Ratio What does it indicate?  The Return on Equity Ratio lets one know the amount of money the owner receive from what he or she invested.  This ratio helps you know how much the company is depending on from others than the money supplied by the owner. Use information from a balance sheet Use information from a balances sheet and a income sheet