Basics of Balance Sheet, Cash Flow & Income Statements

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Balance Sheet #1Cash Flow

Financial Snapshot Financial Snapshot

Meeting Financial Obligations

Good old fashion recordkeeping

Balance Sheet #2

Working Capital

Debt/Asset Ratio

Net Worth

Working Capital

Debt/Asset Ratio

Net Worth

Income

Statement

(Profitability)

Statement of cash flow

(Sources & uses of money)

Commit This Diagram to Memory

Balance Sheet as of [a single date] Consolidated Personal Business

Current Assets Current Liabilities

Non Current Assets Non Current Liabilities

Net Worth or Owner Equity

Current

Non Current

Net Worth = Assets - Liabilities

Income Statement StructureRevenuesGross Revenues (example: $500,000)

Operating Expenses (example: $250,000)Depreciation Expenses (example: $ 50,000)Total Operating Expenses (example: $300,000)

Diff. between revenue & Expenses is

Operating Margin ($200,000)

Financing ExpensesTotal Financing Expenses (example: $25,000)

Net Farm Income from Operations $175,000

Key RatiosFrom the Income Statement

Financial efficiency ratios come from the income statement. The following four categories are looked at as a percentage of gross revenues.Operating expenses—50%Depreciation expense—10%Interest expense—5%Net Farm Income—35%

Key RatiosFrom the Balance Sheet

• Working Capital• Debt/Asset Ratio• Net Worth

Green Paper—Balance Sheet Exercise

Benchmark Ratios

Your Turn to Fill Out a Balance Sheet

• Investing for Farm Families has a very user friendly balance sheet that has a personal balance sheet as well as a business balance sheet. On completion you will see a completed balance sheet and distribution diagram between personal and business assets.