Apr 27

https://www.youtube.com/watch?v=qDEuHwbiqqE

DEFINITION of ‘Financial Statements’

Records that outline the financial activities of a business, an individual or any other entity. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers. Financial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statements. Source: Investopedia

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Mar 22

A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. Although many Americans already use a budget to plan their spending, the majority of Americans also routinely spend more than they can afford. The key to spending within your means is to know your expenses and to spend less than you make. A good monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies, and reach your financial goals.

Most of the information you need is already at your fingertips. To create or rework your budget, follow the simple steps outlined below to get a clear picture of your monthly finances. You can also use our free online budgeting calculators below to budget for certain specific purchases or events.

1. Add Up Your Income 
To set a monthly budget, you first need to determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income–including a spouse’s income if you’re married.

If you get a salary, be sure to use your take-home pay rather than your gross pay. Taxes are usually taken out automatically, but if they’re not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source along with the amount under “other income.”

2. Estimate Expenses 
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.

3. Figure Out The Difference 
Once you’ve totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you’re spending less than you earn–congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.

Well done–you’ve created a budget. The next step is to track your budget over time to make sure you’re sticking to it. If you find you aren’t able to follow your budget successfully, it may mean that your plan isn’t flexible enough. It can take revisiting your budget a few times to find the balance that works for you.

 

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Pedro Marques
PHC-BR International
Skype: chagas-es

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Aug 25

This is by far one of the simplest explanations on the subject of finances out there. Today you learn the difference between gross profit, operating profit and net profit.

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Pedro Marques
PHC-BR International
Skype: chagas-es

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Aug 07

Definition of Cash Flow Statement

One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.

Because public companies tend to use accrual accounting, the income statements they release each quarter may not necessarily reflect changes in their cash positions. For example, if a company lands a major contract, this contract would be recognized as revenue (and therefore income), but the company may not yet actually receive the cash from the contract until a later date. While the company may be earning a profit in the eyes of accountants (and paying income taxes on it), the company may, during the quarter, actually end up with less cash than when it started the quarter. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important: it helps investors see if a company is having trouble with cash.

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Pedro Marques
PHC-BR International
Skype: chagas-es

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Jul 26

Income Statement  definition: A document generated monthly and/or annually that reports the earnings of a company by stating all relevant income and all expenses that have been incurred to generate that income. Also referred to as a profit and loss statement.

The income statement is a simple and straightforward report on a business’ cash-generating ability. It’s a scorecard on the financial performance of your business that reflects when sales are made and expenses are incurred. It draws information from the various financial models such as revenue, expenses, capital (in the form of depreciation) and cost of goods.

By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or a loss. It differs from a cash flow statement because the income statement doesn’t show when revenue is collected or when expenses are paid. It does, however, show the projected profitability of the business over the time frame covered by the plan. For a business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second and annually for the third.

Your income statement lists your financial projections in the following manner:

  • Income includes all the income generated by the business.
  • Cost of goods includes all the costs related to the sale of products in inventory.
  • Gross profit margin is the difference between revenue and cost of goods. Gross profit margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated as a percentage of revenue.
  • Operating expenses include all overhead and labor expenses associated with the operations of the business.
  • Total expenses are the sum of cost of goods and operating expenses.
  • Net profit is the difference between gross profit margin and total expenses. The net income depicts the business’ debt and capital capabilities.
  • Depreciation reflects the decrease in value of capital assets used to generate income. It’s also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
  • Earnings before interest and taxes shows the capacity of a business to repay its obligations.
  • Interest includes all interest payable for debts, both short-term and long-term.
  • Taxes includes all taxes on the business.
  • Net profit after taxes shows the company’s real bottom line.

Although the basics of an income statement are the same from business to business, there are notable differences between services, merchandisers, and manufacturers when it comes to the accounting of inventory.

For service businesses, inventory includes supplies or spare parts–nothing for manufacture or resale. Retailers and wholesalers, on the other hand, account for their resale inventory under cost of goods sold, also known as cost of sales. This refers to the total price paid for the products sold during the income statement’s accounting period. Freight and delivery charges are customarily included in this figure. Accountants segregate costs of goods on an operating statement because it provides a measure of gross profit margin when compared with sales, an important yardstick for measuring the firm’s profitability.

For a retailer or wholesaler, cost of goods sold is equal to total inventory at the beginning of the accounting period plus any merchandise purchased, including freight costs, minus the inventory present at the end of the accounting period. This is your total cost of goods sold.

Although manufacturers account for cost of goods sold in the same manner as merchandisers by reporting beginning and ending inventories, as well as any purchases made during the accounting period, their approaches are also different because they track inventory through three phases.

  1. Raw material is purchased to create a finished product.
  2. Work-in-progress is inventory that is partially assembled.
  3. Finished products are inventory fully assembled and available for sale.

Associated with this process are other costs, such as direct labor and factory overhead. To account for all these costs, manufacturers usually report them on a separate statement called the “cost of goods manufactured.” This statement is formed by first listing the work-in-progress inventory at the beginning of the accounting period. The next listed are raw material and direct labor. The total cost of materials available for use includes inventory at the beginning of the accounting period plus new purchases and freight charges. Subtract the raw material inventory present at the end of the reporting period from the cost of material available for use to determine the cost of materials used. Add direct labor and manufacturing overhead to this amount. This results in your total manufacturing costs. Add the work-in-progress beginning inventory present at the end of the accounting period. This supplies you with the cost of goods manufactured.

In the income statement for manufacturers, cost of goods manufactured is added to the finished goods inventory at the beginning of the inventory, resulting in total cost of goods available for sale. The finished goods inventory present at the end of the reporting period is subtracted from this amount to produce the cost of goods sold.

When comparing several income statements over time, you can chart trends in your operating performance. This helps you chart future goals and strategies for sales, inventory, and operating overhead.

 

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Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

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Source: http://www.entrepreneur.com

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Jul 14

Do you know what is a balance sheet?
Do you know what is an income statement?
Do you know what is a cash flow statement?
Good.

Now you are becoming aware of more opportunities and eventually you will improve the quality of your life!
Thanks for watching this video and stay tune for more.

If you enjoyed this post please comment and share if you want more content like this.

Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

Check our website: http://www.phcbrinternational.com
Watch our blog: http://www.businessexpertsonline.net
Like our page: https://www.facebook.com/PHC.BR.International
Follow us: https://twitter.com/PHC_BR

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