Financial Statements, Balance Sheet and Income Statement

The balance sheet shows the financial picture of a business at a given point in time. It is what the organization owns versus what they owe.

The income statement shows the profit (or revenue-positive position) versus the loss of an organization over time.

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For this phase, utilize Merrill Lynch’s handout on reading financial statements

You can put this in google & it’ll pull it up:

https://e145.standford.edu/upload/Merrill_Lynch.pdf

 

 

1. Using one year of the balance sheet, determine the organization’s liquidity through the current ratio and debt-to-equity ratio.

Use the table below and answer the questions.

(This is supposed to be a table but I cant included it for some reason)

Left Side Right Side

Current Assets ________ Current Liabilities______

Fixed Assets _________ Long-Term Liabilities______

Other Assets __________ Shareholder Equity ________

a. What is the current ratio? Do you have enough current assets to meet your current liabilities? Explain. (Refer to page 23 of the Merrill Lynch handout)

b. What is their debt-to-equity ratio? Total liabilities/total shareholder equity =

2. Using one year of the income statement, determine the organization’s profitability or fund balance perspective through operating margin and net profit ratio. Use the table below and analyze the both the operating margin and net profit ratio. Refer to page 31. Of the Merrill Lynch handout/link.

Operating Margin = Operating Income/net sales

Net Profit Margin= Net Income/net sales

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