Finance for Non Finance Managers

Current Assets, Current Liabilities, Non-Current Assets, Non-Current Liabilities, Net Worth

Assets = Liabilities + Net Worth

Preparing P&L, Balance Sheet and Cash Flow

Financial Statements

Understanding Assets Side of the Balance Sheet - Microsoft

Understanding Liabilities And Equity Side of Balance Sheet_ Microsoft

My friends. So let us understand that as far as this case study of Netflix is concerned, where the challenge will be in terms of understanding the flow. So see broadly, as students of finance or non finance, you are aware of the broad flow that. Okay, there is a revenue in a company. And once you have a particular revenue which could be in this case insant rupes sorry.Hi friends. In this short video, we are going to understand the REUE and the balance sheet of Netflix along with certain ratios as to how they are calculated. What is the FLUW, et cetera?So typically what is going to happen is that in any consolidated, the word here is consolidated, which means it is not just Netflix, but includes its subsidiaries, associates and JVS, if any. So it's a at a consolidated level.So there are subsidiaries, there are JV, joint ventures. So normally you'll have companies which have financials, either on a stand alone basis, that is only that or on a consolidated basis which takes into consideration, in simpler terms, the entire group structure.So you got revenues, and then there's a cost of that revenues, which essentially is your cost. And then this company puts us marketing, technology, development and general admin expenses as separate to give us an operating income.And then from that operating income, we reduce the interest expenses and we get the interest income to get you the income before income taxes. The flow. Is that okay? First, we calculate taxes on the basis of the function that. Okay, I have considered all other expenses except taxes there.So you've got something called PBT, which is profit before tax. You reduce tax here and you get the profit after tax. And from there, what we do is we look at there is something called earnings per share, which is there, which becomes the function of price to earnings ratio called P ratio.So this becomes the entire construct for a profit and loss account known as a statement of operations and income statement, et cetera. As far as a balance sheet is concerned, you'll have the asset side. It appeared in a vertical format.So historically, there was a T format balance sheet that was repaired, but no longer is that the case. So that case you would have liatities. And here and as on the right hand side of the balance sheet. But here, if you look at it, what happens is that you've got all the current assets here. Cash and cash equivalent short term investments. Other current assets and then content assets property plant equipment.So property plant equipment is a major thing for them as less content assets because build their in library of content. All the movies, the money heist of the world. Then you've got the other noncurrent assets.So you got the total assets on the liability side, you'll have current and non current. What does this mean? Any liability which is payable in the next one year is a current liability, and if it is one plus year, then that liability is known as a noncurrent liability.So what we do is that we look at the current liabilities for the content accounts payable accrued expenses, deferred revenue, short term debt. So that becomes the total current liabilities and then noncurrent liabilities. However, we put it as non current incurred content liabilities and then long term debt.So there are two components of debt, one which is retable in the next twelve months or one year and one which is after that. So whatever happens in the next twelve months is current in nature and what happens in one plus years is non current in nature.So you get the total liabilities and then you get the total shareholder equity, common stock, treasury stock, et cetera. So you got the total shareholders' equity and then liabilities plus shareholders' equity. Now coming to certain aspects, what we will be doing is that we will look at current ratios.So current ratio basically determines the current assets by current liabilities. The healthy ratio this should be that at least current assets should be 2 is to one. Now again, that will depend on industry to industry. But yeah, even if it is one is to one. But you should not have current assets which are less than current liabilities. Except in the case of, let's say an FMC G company where they sell in cash and they still get a lot of credit from there on their purchases.So in that case, you might as well have this as a fraction of thing. So you might have 5 as a current asset and 10 as a current liability.So this becomes 0.5. Working capital is current assets minus current liabilities. Quick ratio. What does this mean? It will be current assets minus two aspects one is inventory and one is prepared expenses. And this is one formula that you can remember. Why? Because it becomes very difficult to, in the short run, convert inventory into cash and prepaid expenses can never ever be converted back to cash.So from that perspective, it becomes a quick ratio. It's an advanced version of current ratio to show a more accurate representation of your CA generation capabilities.And then you've got debt to equity, which is long term debt to shareholders' equity, and then debt to assets, which is long term debt to total assets. So what we've done here is that we've done the calculation as total shareholders' equity is in the denominator and long term debt is in the numerator. As far as debt to assets is concerned, again, we take only the long term debt here. And we take the entire assets. Which is in sell number f15. Okay.So then we got asset turnover ratio. What is that? Basically whatever is my revenue how many times my revenue is as a denominator being total assets, so how many times it is?So let's say if I've deployed a total assets of hundred, then my revenue will be 0.65 of that asset. That is 65 dollars. So that becomes my revenue.So revenue divide by total assets gives my asset turnover ratio. And then my return on assets is operating income divided by assets.So my operating income is basically this, which is calculated without considering the impact of interest. That divide by total assets gives me my return on assets. As far as return on equity is concerned, my net income, which is my total shareholders' equity is the denominator and net income is my total profit after tax, which is the net thing which is earned by the business after paying all obligations even to the government. Then you've got days of sales outstanding, which is how much is my account receivable? Which has been taken from the notes to account because it's not part of the full balance sheet here. And that divided by my credit sales and into B six, which is my total revenue.So you are assuming that this is my total thread sales. And then you've got inventory turnover, which is not applicable because it is a service industry.So there is no inventory here. In fact, in this case inventory is zero.So what we do is that. Okay. We have just taken the total credit assets minus just the prepaid expenses, which you've taken from the grouping, which is part of the detailed loans. And so there's no inventory. And we've calculated this. Thank you.

Apple's Financial Statements

Unit Economics and Customer Lifetime Value

Common Size Income Statement _Apple Inc

Common Size Balance Sheet

Trend Analysis

Budgeting_ Concept and Overview

Practical Illustration - Revenue and Cost Budget

Practical Illustration Flexible Budget - Variable, Semi Variable and Fixed Costs

Illustration on Working Capital

Case Study Investment Appraisal