PROFIT IS AN ILLUSION. CASH IS KING

According to GAAP (General accepted accounting principles) , a company’s financial activities is reported via 4 basic financial statements: balance sheet, Income Statement, statement of owners equity and statement of cash flow. Below are some of the keyword highlights from one of the previous CFA classes we have had:

The balance sheet : This presents in a summary form as of a specific date, the assets owned by the company, the liabilities owned by the company, the liabilites owned by the company to its suppliers and lenders who have provided funds to the business, and the accumulated fund the business or the enterprise has invested and left with the business to cover its operating needs. What differentiats the balance sheet with other financial statements is that :

• It is present at the particularytime
• A balance sheet showed the types of resources used or availabe to use by the company
• Sources the company used to obtain resources.

Asset: These are tangible and intangible resources that can be measured in Naira, that is owned by the company, and can be expected to provide future economic benefit to the company. Assets can be classified into 3 major categories

• Income generating and Non – income generating assets
• Tangible and Intangible assets
• Current and Non- current assets

Liabilities: These are the dollar measure of the company’s obligation to repay monies loaned it, pay for goods or services it has received or fulfil commitments it has made.

Owner’s Equity: This is the Naira measure of the owner’s investment in the company derived from other assets. That is either , Direct cash infused into the business in exchange for shares.stocks or allowaing the company retain some earnings that would other wise be paid out to them.

In summary, i got to understand and see the balance sheet as one of the most important financial statements, of any company as it shows you the exact financial position of the company at any given time. Another major learning point for me was the emphasis on the formula ( A = L + OE) and how it must always balance.

At the end of class, I was able to effectively analyze the core components of the financial statement as well as see the differences based on the industry being represented.

one thing I am certain about is that i will never have to read financial statements ignorantly anymore. it is all makes sense now.

#MMBA5