Appunti Business Economics & Organization (Mechanical Engr. POLITO)-INTRODUCTION TO FINANCIAL STATEMENTS, Appunti di Business Planning

Scarica Appunti Business Economics & Organization (Mechanical Engr. POLITO)-INTRODUCTION TO FINANCIAL STATEMENTS e più Appunti in PDF di Business Planning solo su Docsity! LESSON 18 – 07/12/18 INTRODUCTION TO FINANCIAL STATEMENTS Every company must present the financial statement at least once a year, but what is it? It can be defined as the set of documents prepared by a company in order to disclose its financial position and share information to external people. It represents the final product of the financial accounting process. Financial statements are intended to meet the needs of users who are not able to require an entity to prepare reports made-to-order to their information needs. Whether and how to divulge financial statements of a company to the public is decided by the single jurisdictions of each country: in Italy, for the corporations, the public disclosure of their financial statements is the “mandatory”. Furthermore, to understand the financial statements, is important to distinguish between stock and flow variables which we have in different documents, as we’ve already seen. • STOCK: This is a type of variable which is measured in a precise moment in time, as example we can think about the amount of cash in a bank account. • FLOW: This is a type of variable which is measured during a period of time, as example we can think about the money that I’ve put in my bank account in a year; in flow variables we will study the money flows during a period. Flow variables change the stock ones: as example, the change of the amount of money in my bank account between two moments, is the net sum of the monetary flows during that period. What are the variables of financial statements? We’ve to speak about accounting, in which there are five variables. • ASSETS: Assets are items of value which the company owns, as examples machinery, cash in forms of banknotes and coins, cash in the bank account (Cash equivalent), buildings… In general assets are resources controlled by the entity as a result of past events and from which the future economic benefits are expected (Some of these assets will create profit). • LIABILITIES: Liabilities are money which the company owns to others, they’re part of the financial resources of the company which are used to finance the assets; as examples vehicle loan, hypothecation, loans by banks… In general liabilities are present obligations of an entity arising from past events, for which the payment is expected to result in an outflow of resources; assets, so what the entity owns, is payed thanks to the liabilities and thanks to the… Equity. • EQUITY: This is the other part of the financial resource of a company. Let’s start from the consideration that in a company, all its assets are financed thanks to liabilities and net equity. Equity represents that portion of financial resources of the company which comes from a direct investment of its shareholders, initial or current, or from the past earnings (So we get the definition of net equity).