WGU C214 Financial Managment Topic 2

WGU C214 Financial Managment Topic 2 Accounting is backward-looking and risk free Finance is forward-looking and involes massive uncertainty Income Statement - show results of operation over time; - revenues - expenses = net income - Think of the income statement as a video camera tracking performance for a period. - usually regarded as the most difficult to analyze and interpret. Balance Sheet - a "snap shot" of a firm's assests & financing at a paticular point in time - viewed as a still shot of what the firm has at one particular moment. - Assets= Liabilities + Owner's Equity Statement of Cash Flows tracks all cash in and out of the firm Cash Accounting cash in =revenue cash out=expense Accrual Accounting - revenues are recognized when the earnings process is complete; - expenses are "matched" to recongized revenues Cash-based income - an informal metric based on cash in & cash out of the firm - cash-based income is similar to what we call Cash Flow from Operations (i.e., CFO) Income for tax purposes based on the government's definition of income, this is the amount of income the government will tax Accounting income