Understanding Accounting and Financial Cycles: A Guide to Income

School: Southern New Hampshire University - Course: SOPHIA LEA GENELE - Subject: Accounting

Accounting and Financial Cycles Income Statement. A classified income statement is a financial document that lists a company's revenues and expenses. Extremely helpful since firms with complex income statements use it more and can simply understand the information in an ordered fashion. Revenue: (found under Gross Margin) The goal of revenue is to demonstrate to managers and investors the amount of income the company generated or lost over the course of a reporting period. Gross Profit: (also known as Gross Margin) This is a business' profit prior to interest payments, operational expenses, and taxes, and it is a required line on an income statement. Signifies COGS (Cost of Goods Sold) is deducted from the Total Revenue Running Margin: (also known as Operating Income or Profit Margin). Operating Margin is a metric used to assess a company's operational expertise and pricing strategy. After paying for variable production expenses like raw materials, a business's availability is measured. Net Revenue A crucial metric that displays an organization's profitability over time. the overall revenue or profits of a company. refers to variances that remain after gross income has been adjusted for taxes, credits, and debits. Major Asset Categories

Balance Sheet Information about a company's assets, liabilities, and shareholders' equity is detailed in a balance sheet. quite helpful because the information is presented in an easy-to-read manner. The three biggest assets on a company's balance sheet are because they give it flexibility and solvency: Inventory, cash on hand, and accounts receivable (classified balance sheet. (2016).Accounts Receivable quantities are important since they demonstrate the business's financial efficiency and ability to collect on its debts. If the company's collections start to diverge more, there can be issues later. (Customers do not meet terms of their accounts). Cash is important because it gives businesses alternatives for expansion and protection from difficult times (Cash Flow Statement. (2015).Inventory is important since it can indicate whether things are getting worse if it grows faster than sales. Current Assets Accounts on the balance sheet that represent all valuable assets and can be converted into cash or cash equivalents.consists of liquid assets, including as receivables, cash and cash equivalents, inventory supplies, sound securities, pre-paid expenses, and other assets that may be quickly turned into cash. Long term Assets. The amounts are noteworthy because changes are a representation of major capital investments or liquidations. The primary component of long-term assets is cash. A surplus could be alarming, while a deficit could raise questions. Businesses that make a lot of money are paid on time and keep their consumers happy.The worth of a company's property, equipment, and other capital assets after bonds, real estate, and stocks have been subtracted. The company expects to either sell after more than a year or realize the financial gain.