Assets: All of the property owned by the company.

Liabilities: All of the debts that the company currently has outstanding to
lenders.
Owners’ Equity (a.k.a. Shareholders’ Equity): The company’s ownership
interest in its assets, after all debts have been repaid.
Cash and Cash Equivalents: Balances in checking and savings accounts, as
well as any investments that will mature within 3 months or less.
Inventory: Goods kept in stock, available for sale.
Accounts Receivable: Amounts due from customers for goods or services that
have already been delivered.
Property, Plant, and Equipment: Assets that cannot easily to be converted
into cash—things such as computers, manufacturing equipment, vehicles,
furniture, etc.
Accounts Payable: Amounts due to suppliers for goods or services that have
already been received.
Notes Payable: A note payable is a written promissory note. Under this
agreement, a borrower obtains a specific amount of money from a lender and
promises to pay it back with interest over a predetermined time period.
Common Stock: Amounts invested by the owners of the company.
Preferred Stock: Preferred shares are so called because they give their owners a
priority claims whenever a company pays dividends or distributes assets to
shareholders.
Retained Earnings: The sum of all net income over the life of the business that
has not been distributed to owners in the form of a dividend.
Current Assets: Current assets are those that are expected to be converted into
cash within 12 months or less. Typical current assets include Accounts
Receivable, Cash, and Inventory.
Current Liabilities: Current liabilities are those that will need to be paid off
within 12 months or less. The most common example of a current liability is
accounts payable, notes payable.
A company’s balance sheet shows its financial position at a given point in
time.
A company’s income statement shows the company’s financial performance
over a period of time (usually one year).
Operating Expenses are the expenses related to the normal operation of the
business and are likely to be incurred in future periods as well. Things such as
rent, insurance premiums, and employees’ wages are typical Operating
Expenses.
Non-Operating Expenses are those that are unrelated to the regular operation
of the business and, as a result, are unlikely to be incurred again in the following
year. (A typical example of a Non-Operating Expense would be a lawsuit.)
The Cash Flow Statement: The cash flow statement reflects a company’s cash
inflows and outflows over an accounting period.
The Balance Sheet: A balance sheet is a financial document designed to
communicate exactly how much a company or organization is worth—its “book
value.” It achieves this by listing and tallying all of a company’s assets,
liabilities, and owner’s equity as of a particular reporting date.
The Purpose of a Balance Sheet: Balance sheets serve two very different
purposes, depending on the audience reviewing them.
When a balance sheet is reviewed internally, it’s designed to give insight into
whether a company is succeeding or failing.
When a balance sheet is reviewed externally, it’s designed to give insight into
the resources available to a business and how they were financed. Based on this
information, potential investors can decide whether it would be wise to invest.
External auditors might also use a balance sheet to ensure a company is
complying with any reporting laws it’s subject to.
The Income Statement: An income statement, also known as a profit and loss
(P&L) statement, summarizes the cumulative impact of revenue, gain, expense,
and loss transactions for a given period.
The Purpose of an Income Statement: An income statement tells the financial
story of a business’s activities. Within an income statement, you’ll find all
revenue and expense accounts for a set period.
Revenue: The amount of money a business takes in during a reporting period
Expenses: The amount of money a business spends during a reporting period
Costs of goods sold (COGS): The cost of component parts of what it takes to
make whatever it is a business sells
Gross profit: Total revenue less COGS
Operating income: Gross profit less operating expenses
Income before taxes: Operating income less nonoperating expenses
Net income: Income before taxes less taxes
Earnings per share (EPS): Division of net income by the total number of
outstanding shares
Depreciation: The extent to which assets (for example, aging equipment) have
lost value over time
Earnings before interest, taxes, depreciation, and amortization (EBITDA):
A measure of a company’s ability to generate cash flow that’s calculated by
adding net profit, interest, taxes, depreciation, and amortization together
IFRS stands for International Financial Reporting Standards. These
principles are dictated by the International Accounting Standards Board (IASB)
and followed in many countries outside the US.
The Cash Flow Statement: A cash flow statement provides a detailed picture
of what happened to a business’s cash during a specified duration of time,
known as an accounting period. It demonstrates an organization’s ability to
operate in the short and long term, based on how much cash is flowing into and
out of it.
The Purpose of a Cash Flow Statement: By reading a cash flow statement,
you can see how much cash different types of activities generate, then make
business decisions based on that analysis.
The Contents of a Cash Flow Statement: Cash flow statements are broken into
three sections: cash flow from operating activities, cash flow from investing
activities, and cash flow from financing activities.
• Operating activities detail cash flow that’s generated once the company
delivers its regular goods or services and includes both revenue and expenses.
• Investing activities comprise of cash flow from purchasing or selling assets
using free cash, not debt; this is usually in the form of physical property, such as
real estate or vehicles, and non-physical property, like patents
• Financing activities detail cash flow from both debt and equity financing
Ideally, cash from operating income should routinely exceed net income. A
positive cash flow speaks to a company’s financial stability and ability to grow
its operations.