FINANCIAL STATEMENTS By: George Goto

FINANCIAL PERFORMANCE RATIO Financial Performance Ratio: Comparisons of a

company’s financial elements that indicate how well the business is performing. There are four types:…

Current Ratio: The current ratio tells you if the business can pay its debts when they become due. It should be at least 1:1 for a healthy business. The formula is current assets / current liabilities.

Debt to Equity Ratio: This ratio tells you how much the business is relying on the money borrowed from others that will have to be paid back rather than money provided by the owners. Most banks hope to see a 2:1 ratio. The formula is total liabilities / owners’ equity.

FINANCIAL PERFORMANCE RATIO (CONT.) Return on Equity Ratio: The return on equity ratio shows

the rate of return the owners are getting on the money they invested in the company. The formula is the net profit / owners’ equity.

Net Income Ratio: This final ratio shows how much profit is being made by each dollar of sales for a specific period of time. The ratio will show if added sales are as effective at adding to the company’s profit as those in the past. The formula is the total sales / net income.

These ratios are very important for businesses. They allow a company to see how much profit they have and if their business is successful or not.

BALANCE SHEET A balance sheet is a financial statement that summarizes

a company's assets, liabilities and shareholders' equity at a specific point in time. This example is from the Edelweiss Corporation.

INCOME STATEMENT An income statement is a financial statement that gives

operating results for a specific period. This is part of Netflix's income statement.