How to Read a Financial Statement: Business Finance Essentials


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In sports, the stat sheet shows who won and lost, as well as how or why each team won or lost. These numbers also tell coaches and players what they’re doing right and what they need to work on. In the world of business, that stat sheet is known as the financial statement—or simply “the financials.” The financials tell the owner or manager the same thing: what you’re doing right, what you need to work on and how your stats compare to your competitor’s. This video covers the basics of reading and understanding a financial statement.

Video Segments

Financial Statement Overview (02:42)

The stat sheet tells coaches what they're doing right, what they need to improve, and what to expect from competition. In business, the balance sheet, income statement, statement of cash flows, and statement of owner's equity show a company's financial health.

Balance Sheet: Assets (01:43)

The balance sheet reflects a company's assets, liability, and owner/shareholder equity. Hear an example of current and non-current assets for a floral shop.

Balance Sheet: Liabilities (02:13)

Current liabilities are amounts owed to others within the fiscal year, and non-current liabilities are those owed after the fiscal year. Hear examples of current and non-current liabilities for a floral shop.

Balance Sheet: Owner's Equity (01:08)

Owner's equity represents the amount of capital owners have in the business, including investment or net income or loss. It is calculated by subtracting liabilities from assets; view a sample owner's equity calculation.

Income Statement (04:01)

An income statement reflects company profitability over a period of time and can be used comparatively. Learn how to calculate net income, cost of goods sold, and gross profit. Hear examples of income and expenses for a flower shop.

Statement of Cash Flows (03:09)

Businesses use cash flow statements to track inflows and outflows over a period of time. They are divided into operating, investing, and financing activities; hear examples of each category.

Statement of Changes in Owner's Equity (01:40)

The statement of changes in owner's equity tracks cash dividend distribution, issuance of company stock shares, net income or loss, and capital investment. View a sample statement.

Financial Statement Summary (01:25)

Financial statements help business owners keep track of what's going well, what needs improvement, and where their money is going. They are also used by investors and creditors to decide how healthy a company is.


Grade: 9-12

How to Read a Financial Statement: Business Finance Essentials (DVD)
© 2015
Time: 20 Minutes

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