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The Balance Sheet. Assets = Liabilities + Equity. Balance Sheet. Is Statement of Financial Position Not necessarily the value of a business Only an estimate of market Value. Balance Sheet. Assets of a business ultimately valued by their ability to generate revenue

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balance sheet
Balance Sheet
  • Is Statement of Financial Position
  • Not necessarily the value of a business
  • Only an estimate of market Value
balance sheet4
Balance Sheet
  • Assets of a business ultimately valued by their ability to generate revenue
  • True value determined from actual sale to third party
primary financial statements
Primary Financial Statements
  • Balance Sheet
  • Earnings Statement
  • Cash Flow Statement
types of accounts
Types of Accounts
  • Assets
  • Liabilities
  • Equity
  • Income
  • Expenses
slide7

Beginning Balance Sheet

Ending Balance Sheet

Assets

Liabilities

Assets

Liabilities

Equity

Equity

  • +/- Net Income
  • +/- Valuation Changes
  • Family living withdrawals
  • + Capital contributions
account valuation
Account Valuation
  • All accounts have dollar value
  • Asset Accounts
    • Cost Basis
    • Market Value
current assets
Current Assets
  • Those that will be realized in cash, sold or consumed in the current operating cycle (1 year)
current assets10
Current Assets
  • Inventories
    • Raised for Sale
    • Raised for use in Production
    • Purchased for Resale
    • Purchased for use in Production
    • Page II-32
valuation issues
Valuation Issues
  • Inventories
    • Lower of Cost or Market
    • Blending
non current assets
Non Current Assets
  • Machinery & Equipment
  • Breeding Livestock
  • Buildings & Improvements
  • Land
  • Other
valuation issues13
Valuation Issues
  • Raised Breeding Stock
    • Full Cost Absorption
    • Base Value Method
    • Page II-36, F-1
current liabilities
Current Liabilities
  • Those that will be discharged by use of current assets or creation of additional current liabilities in the current operating cycle.
deferred taxes
Deferred Taxes
  • Tax liability in event of liquidation
  • Liquidation Value –Tax Basis times tax rate
  • Page II-24
depreciation
Depreciation
  • Allocation of the expense that reflects “using up” of capital assets
depreciation17
Depreciation

Original Cost – Salvage Value

Years of useful Life

depreciation issues
Depreciation Issues
  • Straight line
  • Accelerated
    • Front end loaded
    • Short life span
  • Section 179
  • Zero Salvage Value
depreciation issues19
Depreciation Issues
  • Capitalize or Expense
    • Small tools
    • Equipment
    • Major repairs
    • Improvements
leverage
Leverage
  • <40% - Financially Sound
  • 40-70% - Vulnerable
  • >70% - Financial Stress
  • >100% - Insolvent
accounts receivable
Accounts Receivable

Sales Revenue

=

Sales/Week

52 weeks

Accts. Receivable

=

Weeks to Collect

Sales/Week

inventory
Inventory

Inventory

Cost of Goods Sold

=

Turnover

Inventory

52 Weeks

Average Inventory

=

Inv. Turnover

Holding Time

accounts payable
Accounts Payable

Inventory

=

COGS/Wk

Ave. Inv. Holding Time

Accounts Payable

=

Weeks to Pay

COGS/Wk