Financial Statement Analysis



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Basics of Financial Statements

Liabilities

  • Liability is a firm’s obligation to pay cash or provide goods or services in the future.
  • Two types of liabilities are:
    • Current liabilities
    • Long-term/Non-Current liabilities
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Current Liabilities

  • Current liabilities are payable within a year in the normal course of business. They include:
  • 09/07/21

Long-term Liabilities

  • Long-term liabilities are payable after a year. They include:
    • Borrowings from financial institutions and banks etc.
    • Debentures/bonds
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Shareholders’ Funds or Equity

  • Share capital is owners’ contribution divided into shares. A share is a certificate acknowledging the amount of capital contributed by the shareholder.
  • Reserves and surplus or retained earnings are undistributed profits.
  • Shareholders’ funds or equity is the sum of share capital plus reserves & surplus. It is also called net worth.
  • 09/07/21

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