PART 2 SECTION A
>FINANCIAL STATEMENT ANALYSIS
>financial analysis for decision making
>operating cycle
it is a period between the purchase of inventory and the final cash receipt from the sale of that inventory.
ASSETS:
2 types of assets
1. current asset
2. noncurrent asset
>current asset
current assets are assets, that can be converted into cash within 1 year or one operating cycle whichever is larger.
it includes cash and cash equivalents.
>cash equivalents
it is a highly short-term liquid investment that can be converted into cash within 3 months or less from the date of purchase.
inventory>
it includes raw materials, working process inventory, finished goods inventory, etc.
>marketable security
it is a short-term investment.
>account receivables
it arises from credit sales.
>prepaid expenses
expenses paid in advance
examples; rent prepaid, commission prepaid, insurance prepaid, etc.
>NON CURRENT ASSET
these are assets that cannot be converted within one year or one operating cycle which even is larger.
example: plant, property, and equipment (fixed assets) long-term investment.
>LIABILITIES
two types of liabilities
1. current liabilities
2. noncurrent liabilities
>current liabilities
it can be settled within 1year or one operating cycle whichever is larger.
example:account payable{it arises from credit purchase}
short term loans
tax payable
outstanding expenses
dividend payable
> noncurrent liabilities
Are liabilities that cannot be settled within 1 year or one operating cycle which is ever larger.
example: long-term loans, bonds, etc.
EQUITY
assets-liability=equity
ELEMENTS OF EQUITY
1. capital stock
it is a par value of the share.
2. Additional paid capital
it is access to par value
3. retained earnings
it is an undistributed profit.
4. treasury stock
it is a repurchase of companies share.
>balance sheet
it provides information about companies' assets, liabilities, and equity at a point in a time.
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