Introduction to Finance: Balance Sheet and Income Statement

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Introduction to FinanceBalance Sheet and Income
Statement
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Annual Report

• Letter from Management.
• Summary of Activities over the past year.
• Assessment of Future Prospects.
• Financial Information

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Financial Information

• Balance Sheet
• Income Statement
• Cash Flows
• Notes

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Balance Sheet

• Snap-shot summary of investing and financing
  activities at a point in time.
• Assets (investing) economic resources which
  provide future benefits.
• Liabilities and Shareholder Equity (financing)
  creditors and owners claim on assets.

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Purchase Assets ????
Raise Cash ????
Produce Goods
Assets (??) Current Assets (????) Fixed Assets
(????)
Debt,Liability (?????) Equity (????)
Balance
retained earnings
Earnings, Net Income
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Assets Liabilities Shareholder Equity
Current Liability (lt1yr)
Current Assets (lt1yr)
Liabilities
Assets
Non-current Liability
Contribution Capital
Non-current Assets
Shareholder Equity
Retained Earnings
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Assets

• Current Assets cash, short-term marketable
  securities, accounts receivable (amount expected
  from customers from sales/services), inventory
  (supplies, finished goods).
• Fixed Assets property, plant equipment
  tangible long-lived assets such as buildings,
  machinery, computers, etc.
• Investments examples include long term
  securities of other firms such as common stock.

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Liabilities

• Current liabilities short term (under a year)
  notes, bonds. Liabilities to suppliers,
  employees,
• Long term (non-current) Examples include bonds,
  mortgages,

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Income Statement

• Summarizes operations, activities over time
  period.
• Revenues inflow of assets (or reduction in
  liabilities) revenue generation.
• Expenses outflow of assets (or increase in
  liabilities) used in generating revenues.
• Net Income Revenues-Expense. Note expense
  includes interest payments and taxes.

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Exercise

• Find corporate website for Sony (English or
  Japanese)
• Find Investor Relations page.
• Find annual report (2002) and related
  information.
• Obtain copy of balance sheet and income statement
  from the annual report.

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Glossary

• Balance Sheet
• Current Asset
• Cash
• Inventory
• Accounts Receivable
• Fixed Asset (PPE)

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• ??(??????)
• ???
• ???? (?????)

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• Current Liability
• Accounts Payable
• Short-term Debt
• Long-term Debt
• Shareholder Equity
• Retained Earnings
• Contributed Capital

• ????
• ???
• ?????
• ?????
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• ????
• ?????????