3 parts in the regulatory reporting

13/04/2023 1

Balance SheetP&L or Income

StatementCash Flow Statement

Shows what the business owns, what it owes to lenders & creditors, and other obligations or claims on the assets at a selected point in time

Shows whether a company made or lost money during the period being reported

Shows where the cash that the company used came from and where the cash that the company generated went to during the period being reported

Indication of the overall financial stability of the

company

Indication of the profitability of the

company

Indication of the ability to pay the bills

P&L statement shows the result of the period

Profit & Loss shows in a standardized way how much profit was created

So basically: Revenue – costs

13/04/2023 2

In ‘000 2012

Net revenue $972,309

Cost of revenue ($125,521)

Gross Margin 846,788

Sales and marketing ($324,896)

Product development ($257,179)

General and administrative ($128,002)

Depreciation and amortization

($79,849)

Operating Profit $56,862

Other income (expense), net ($252)

Provision for income taxes ($57,114)

Net income (loss) $21,610

Example: Linkedin

Compare to: Your Monthly Household Budget

Buy a new car of $30K

Sometimes there is a timing difference between expense and cash out

13/04/2023 3

Year 1 Year 2 Year 3

Cash -30,000

P&L -10,000 -10,000 -10,000

Balance 20,000 10,000 0

Income Statement - A simple example from personal life

13/04/2023 4

Month January Income €2,000

Net Salary €1,800

Expense allowance €200

Month January Expenses €1,800

Mortgage (€300 interest + €500 capital) €800

Utilities €200

Food & Beverage €600

Clothing €100

Reduction in car-value €100

Month January Result €200