00:02
So the 3 financial statements are the balance sheet income statement and the statement of cash flows.
00:09
Let's start with the balance sheet, so the balance sheet is a snap shot of a company's performance at a given time.
00:16
So the basic equation for a balance sheet is assets, equals liabilities, plus shareholders, equity, so assets are company resources that they can use to generate a revenue.
00:29
So an example of this is cash or property.
00:33
A liability is obligations that a company owes to another entity company or a person, so think, loans, taxes, that kind of thing and then shareholders equity, is stakes that other people have in the company so think common stock or treasury stock is anything that makes a person liable for a company now, let's go to the income statement, so the income statement is a summary of a company's performance over time.
01:06
So, unlike the balance sheet, the income statement actually shows the company performance over time, whereas the balance sheet would be a snap shot.
01:13
So a basic formula for the income statement are: is revenues? minus expenses equals net income, so revenues are inflows of money that is generated by an organization.
01:26
Company and expenses are outflows of this money that they generate.
01:32
So expenses can include payments that they have to make and things of that nature and revenues could be something like cash generated from their their activities or a loan being paid off and then gaining the money for that loan.
01:49
So the net income is the revenue minus the expenses which shows the company's profit in a given time period...