BUSINESS FINANCIAL STATEMENTS GUIDE

Table of Contents

1. Introduction
2. Income Statement
3. Balance Sheet
4. Cash Flow Statement
5. Statement of Changes in Equity
6. Notes to Financial Statements
7. Financial Analysis
8. Compliance and Standards
9. Appendices

Introduction

This comprehensive guide to business financial statements is designed to provide business owners, particularly minority and women business owners (MWBEs), small business owners seeking expansion capital, and first-time entrepreneurs, with a thorough understanding of financial reporting requirements and best practices. The information contained herein represents standard accounting practices as of [YEAR] and should be used in conjunction with professional accounting and legal advice tailored to your specific business circumstances.

Financial statements serve as the foundation for informed business decision-making, securing funding, demonstrating business viability to stakeholders, and ensuring regulatory compliance. This guide breaks down each component of standard business financial statements in clear, accessible language while maintaining the technical accuracy required for proper financial reporting.

Income Statement

1. Revenue Recognition

1.1 Definition and Scope

Revenue shall be recognized in accordance with applicable accounting standards (GAAP or IFRS) when the entity has satisfied its performance obligations by transferring promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

1.2 Revenue Sources Documentation

All revenue sources must be properly documented and categorized, including but not limited to: a) Sale of goods b) Provision of services c) Usage fees from others using company assets d) Interest, royalties, and dividends e) Commission revenue f) Subscription revenue g) Grant income (where applicable) h) Other income streams specific to the business

1.3 Revenue Recognition Timing

Revenue shall be recognized in the appropriate accounting period based on: a) For goods: When control transfers to the customer b) For services: As the service is performed and the customer simultaneously receives and consumes the benefits c) For long-term contracts: Using either percentage-of-completion or completed contract method as appropriate under applicable accounting standards

1.4 Revenue Presentation

Revenue shall be presented as the gross amount received or receivable when the business acts as a principal, and as the net amount retained (commission or fee) when acting as an agent.

2. Cost of Goods Sold (COGS)

2.1 Definition and Scope

Cost of Goods Sold represents all direct costs attributable to the production of goods sold or services rendered by the business during the reporting period.

2.2 COGS Components

COGS shall include, but is not limited to: a) Raw materials and direct inputs b) Direct labor costs, including wages, benefits, and payroll taxes for production personnel c) Manufacturing overhead directly attributable to production, including: i. Factory rent and utilities ii. Production equipment depreciation iii. Production supervision iv. Quality control costs v. Maintenance and repairs of production equipment d) For service businesses: Direct costs of service delivery e) Freight-in and transportation costs related to acquiring inventory f) Purchase returns and allowances (as reductions) g) Purchase discounts (as reductions)

2.3 Inventory Valuation Methods

Inventory shall be valued using one of the following methods, applied consistently: a) First-In, First-Out (FIFO) b) Last-In, First-Out (LIFO) where permitted by applicable accounting standards c) Weighted Average Cost d) Specific Identification for high-value items

2.4 COGS Calculation

COGS shall be calculated using the formula: Beginning Inventory + Purchases + Direct Production Costs - Ending Inventory = Cost of Goods Sold

3. Gross Profit Calculation

3.1 Definition and Formula

Gross Profit shall be calculated as Total Revenue minus Cost of Goods Sold.

3.2 Gross Margin Calculation

Gross Margin shall be calculated as Gross Profit divided by Total Revenue, expressed as a percentage.

3.3 Segmented Reporting

Where applicable, Gross Profit and Gross Margin shall be calculated and reported by: a) Product line b) Service category c) Business segment d) Geographic region e) Other meaningful business divisions

3.4 Comparative Analysis

Gross Profit and Gross Margin shall be presented with comparative figures from at least one prior period of equal length to facilitate trend analysis.

4. Operating Expenses

4.1 Definition and Scope

Operating Expenses include all costs incurred in the normal course of business operations that are not directly attributable to the production of goods or delivery of services.

4.2 Operating Expense Categories

Operating Expenses shall be categorized and reported in detail, including but not limited to: a) Selling expenses: i. Sales salaries, commissions, and benefits ii. Advertising and marketing expenses iii. Travel and entertainment iv. Sales office expenses v. Shipping and delivery expenses b) General and administrative expenses: i. Executive and administrative salaries and benefits ii. Office rent and utilities iii. Office supplies and equipment iv. Professional fees (legal, accounting, consulting) v. Insurance premiums vi. Licenses and permits vii. Bank charges and fees c) Research and development expenses d) Technology and IT expenses e) Training and development costs f) Bad debt expense

4.3 Expense Recognition

Expenses shall be recognized in the period in which they are incurred, regardless of when payment is made, in accordance with the accrual basis of accounting.

4.4 Expense Allocation

Shared or indirect expenses shall be allocated to appropriate departments, products, or business segments using a reasonable and consistently applied allocation methodology.

5. Depreciation and Amortization

5.1 Depreciation of Tangible Assets

Depreciation of tangible fixed assets shall be: a) Calculated using an appropriate method: i. Straight-line method ii. Declining balance method iii. Units of production method iv. Sum-of-the-years'-digits method b) Based on: i. Estimated useful life of the asset ii. Estimated residual value iii. Historical cost or revalued amount as appropriate c) Recorded as an expense in the income statement d) Accumulated in the balance sheet as a contra-asset account

5.2 Amortization of Intangible Assets

Amortization of intangible assets with finite useful lives shall be: a) Calculated using an appropriate method, typically straight-line b) Based on the estimated useful life or legal life, whichever is shorter c) Recorded as an expense in the income statement d) Accumulated in the balance sheet as a contra-asset account

5.3 Asset Classes and Useful Lives

Standard useful lives shall be established for classes of assets, including but not limited to: a) Buildings: 20-40 years b) Machinery and equipment: 5-15 years c) Vehicles: 3-7 years d) Computer equipment: 3-5 years e) Furniture and fixtures: 5-10 years f) Software: 3-5 years g) Patents: Legal life or economic life, whichever is shorter h) Trademarks: 5-15 years or indefinite life with annual impairment testing

5.4 Disclosure Requirements

Depreciation and amortization disclosures shall include: a) Methods used b) Useful lives or amortization rates c) Total depreciation and amortization expense for the period d) Reconciliation of beginning and ending accumulated depreciation and amortization

6. Interest Expense

6.1 Definition and Scope

Interest Expense represents the cost of borrowed funds used in the business during the reporting period.

6.2 Interest Expense Components

Interest Expense shall include: a) Interest on short-term loans and lines of credit b) Interest on long-term loans and mortgages c) Interest on bonds and notes payable d) Interest on capital leases e) Amortization of debt issuance costs f) Interest on late tax payments or other obligations g) Interest component of defined benefit pension plans

6.3 Interest Capitalization

Interest incurred during the construction or development of qualifying assets shall be capitalized in accordance with applicable accounting standards rather than expensed.

6.4 Disclosure Requirements

Interest Expense disclosures shall include: a) Total interest expense for the period b) Interest expense by major debt category c) Weighted average interest rate d) Amount of interest capitalized during the period e) Unused lines of credit and their terms

7. Tax Provisions

7.1 Current Tax Provision

Current tax provision shall be calculated based on: a) Taxable income for the period b) Applicable tax rates for federal, state, local, and international jurisdictions c) Available tax credits and incentives d) Estimated tax payments made during the period

7.2 Deferred Tax Provision

Deferred tax provision shall be calculated based on: a) Temporary differences between book and tax accounting b) Tax loss carryforwards and carrybacks c) Tax credit carryforwards d) Changes in valuation allowances e) Changes in tax rates or tax laws

7.3 Effective Tax Rate Reconciliation

A reconciliation of the statutory tax rate to the effective tax rate shall be provided, explaining material differences due to: a) Permanent differences b) Foreign tax rate differentials c) State and local taxes, net of federal benefit d) Tax credits and incentives e) Changes in valuation allowances f) Prior year adjustments g) Uncertain tax positions

7.4 Disclosure Requirements

Tax provision disclosures shall include: a) Current and deferred tax expense or benefit b) Effective tax rate reconciliation c) Components of deferred tax assets and liabilities d) Valuation allowances and their changes e) Tax loss and credit carryforwards and their expiration f) Uncertain tax positions and related reserves

8. Net Income Calculation

8.1 Definition and Formula

Net Income (or Net Loss) shall be calculated as: Total Revenue - Cost of Goods Sold - Operating Expenses - Depreciation and Amortization - Interest Expense - Tax Provision = Net Income

8.2 Extraordinary Items and Discontinued Operations

Material non-recurring items shall be separately disclosed, including: a) Gains or losses from discontinued operations b) Extraordinary items (where permitted by applicable accounting standards) c) Effects of changes in accounting principles d) Prior period adjustments

8.3 Earnings Per Share (if applicable)

For corporations with shareholders, Earnings Per Share shall be calculated as: a) Basic EPS = (Net Income - Preferred Dividends) ÷ Weighted Average Common Shares Outstanding b) Diluted EPS = (Net Income - Preferred Dividends) ÷ (Weighted Average Common Shares Outstanding + Dilutive Securities)

8.4 Comprehensive Income

Comprehensive Income shall include Net Income plus Other Comprehensive Income items such as: a) Unrealized gains or losses on available-for-sale securities b) Foreign currency translation adjustments c) Pension and other post-retirement benefit plan adjustments d) Cash flow hedge gains or losses

Balance Sheet

9. Current Assets

9.1 Cash and Cash Equivalents

Cash and Cash Equivalents shall include: a) Currency on hand b) Demand deposits with financial institutions c) Highly liquid investments with original maturities of three months or less d) Restricted cash (with appropriate disclosure)

9.2 Short-term Investments

Short-term Investments shall include: a) Marketable securities expected to be converted to cash within one year b) Certificates of deposit with maturities of one year or less c) Commercial paper d) Other short-term investment vehicles

9.3 Accounts Receivable

Accounts Receivable shall be: a) Recorded at the amount expected to be collected b) Presented net of allowance for doubtful accounts c) Aged and analyzed for collectibility d) Disclosed with significant concentration risks

9.4 Inventory

Inventory shall be: a) Categorized as: i. Raw materials ii. Work-in-process iii. Finished goods iv. Supplies and packaging materials b) Valued at the lower of cost or net realizable value c) Evaluated for obsolescence with appropriate reserves established d) Disclosed with the valuation method used

9.5 Prepaid Expenses

Prepaid Expenses shall include: a) Insurance premiums paid in advance b) Rent paid in advance c) Prepaid advertising and marketing costs d) Prepaid taxes and licenses e) Other payments made for benefits to be received in future periods

9.6 Other Current Assets

Other Current Assets shall include: a) Current portion of notes receivable b) Vendor deposits and advances c) Refundable taxes d) Assets held for sale e) Other items expected to be converted to cash within one year

10. Fixed Assets

10.1 Property and Land

Property and Land shall be: a) Recorded at historical cost plus improvements and direct acquisition costs b) Separated between land (non-depreciable) and buildings (depreciable) c) Evaluated for impairment when events or changes in circumstances indicate carrying value may not be recoverable d) Disclosed with details of significant properties

10.2 Plant and Equipment

Plant and Equipment shall be: a) Recorded at historical cost plus installation and preparation costs b) Categorized by major asset class c) Depreciated over estimated useful lives d) Presented net of accumulated depreciation e) Disclosed with depreciation methods and useful lives

10.3 Furniture and Fixtures

Furniture and Fixtures shall be: a) Recorded at historical cost b) Depreciated over estimated useful lives c) Presented net of accumulated depreciation d) Disclosed with depreciation methods and useful lives

10.4 Vehicles

Vehicles shall be: a) Recorded at historical cost b) Depreciated over estimated useful lives c) Presented net of accumulated depreciation d) Disclosed with depreciation methods and useful lives

10.5 Leasehold Improvements

Leasehold Improvements shall be: a) Recorded at historical cost b) Amortized over the shorter of the useful life or remaining lease term c) Presented net of accumulated amortization d) Disclosed with amortization methods and terms

10.6 Construction in Progress

Construction in Progress shall be: a) Recorded at accumulated cost to date b) Not depreciated until placed in service c) Disclosed with estimated completion dates and remaining costs

11. Intangible Assets

11.1 Goodwill

Goodwill shall be: a) Recorded at cost as the excess of purchase price over fair value of identifiable net assets acquired in business combinations b) Not amortized but tested for impairment at least annually c) Allocated to appropriate reporting units d) Disclosed with changes during the period and impairment testing results

11.2 Patents

Patents shall be: a) Recorded at acquisition cost or legal and registration costs for internally developed patents b) Amortized over the legal life or useful economic life, whichever is shorter c) Presented net of accumulated amortization d) Evaluated for impairment when events or changes in circumstances indicate carrying value may not be recoverable e) Disclosed with amortization methods and remaining useful lives

11.3 Trademarks and Trade Names

Trademarks and Trade Names shall be: a) Recorded at acquisition cost or registration costs for internally developed trademarks b) Amortized over the estimated useful life if finite, or tested for impairment annually if indefinite-lived c) Presented net of accumulated amortization (if applicable) d) Disclosed with amortization methods and remaining useful lives or impairment testing results

11.4 Copyrights

Copyrights shall be: a) Recorded at acquisition cost or registration costs for internally developed copyrights b) Amortized over the legal life or useful economic life, whichever is shorter c) Presented net of accumulated amortization d) Disclosed with amortization methods and remaining useful lives

11.5 Software and Technology

Software and Technology shall be: a) Recorded at acquisition cost or development costs meeting capitalization criteria b) Amortized over the estimated useful life c) Presented net of accumulated amortization d) Evaluated for impairment when events or changes in circumstances indicate carrying value may not be recoverable e) Disclosed with amortization methods and remaining useful lives

11.6 Other Intangible Assets

Other Intangible Assets shall be: a) Recorded at acquisition cost or development costs meeting capitalization criteria b) Amortized over the estimated useful life if finite, or tested for impairment annually if indefinite-lived c) Presented net of accumulated amortization (if applicable) d) Disclosed with nature, amortization methods, and remaining useful lives or impairment testing results

12. Current Liabilities

12.1 Accounts Payable

Accounts Payable shall include: a) Amounts owed to suppliers for goods and services received b) Accrued purchases where invoices have not yet been received c) Disclosed with significant concentration to specific vendors or industries

12.2 Short-term Loans and Lines of Credit

Short-term Loans and Lines of Credit shall include: a) Borrowings due within one year b) Current portion of long-term debt c) Lines of credit balances d) Disclosed with interest rates, maturity dates, and collateral

12.3 Accrued Expenses

Accrued Expenses shall include: a) Accrued payroll and related benefits b) Accrued interest c) Accrued utilities and rent d) Accrued professional fees e) Other expenses incurred but not yet paid f) Disclosed with significant categories itemized

12.4 Unearned Revenue

Unearned Revenue shall include: a) Customer deposits b) Advance payments for goods or services not yet delivered c) Subscription or membership fees collected in advance d) Disclosed with expected timing of revenue recognition

12.5 Taxes Payable

Taxes Payable shall include: a) Income taxes payable b) Sales and use taxes payable c) Payroll taxes payable d) Property taxes payable e) Other tax obligations due within one year f) Disclosed with types of taxes and payment due dates

12.6 Current Portion of Long-term Liabilities

Current Portion of Long-term Liabilities shall include: a) Principal payments on long-term debt due within one year b) Current portion of capital lease obligations c) Current portion of deferred compensation arrangements d) Disclosed with cross-reference to related long-term liability notes

13. Long-term Liabilities

13.1 Long-term Debt

Long-term Debt shall include: a) Term loans with maturities beyond one year b) Mortgages with maturities beyond one year c) Bonds payable with maturities beyond one year d) Notes payable with maturities beyond one year e) Disclosed with interest rates, maturity dates, payment schedules, covenants, and collateral

13.2 Capital Lease Obligations

Capital Lease Obligations shall include: a) Present value of minimum lease payments for leases classified as capital leases b) Disclosed with lease terms, interest rates, and payment schedules

13.3 Deferred Tax Liabilities

Deferred Tax Liabilities shall include: a) Future tax obligations arising from temporary differences between book and tax accounting b) Disclosed with nature of temporary differences and expected reversal periods

13.4 Pension and Post-retirement Benefit Obligations

Pension and Post-retirement Benefit Obligations shall include: a) Projected benefit obligations less plan assets for defined benefit plans b) Post-retirement healthcare and other benefit obligations c) Disclosed with actuarial assumptions, funded status, and expected future contributions

13.5 Other Long-term Liabilities

Other Long-term Liabilities shall include: a) Deferred compensation arrangements b) Asset retirement obligations c) Warranty reserves extending beyond one year d) Contingent consideration from business combinations e) Other obligations due beyond one year f) Disclosed with nature, terms, and expected settlement dates

14. Owner's Equity/Shareholders' Equity

14.1 Contributed Capital

Contributed Capital shall include: a) For sole proprietorships and partnerships: i. Owner's capital contributions ii. Partner capital accounts b) For corporations: i. Common stock at par value ii. Preferred stock at par value iii. Additional paid-in capital c) For LLCs: i. Member capital contributions d) Disclosed with classes of stock, par values, authorized shares, issued shares, and outstanding shares

14.2 Retained Earnings

Retained Earnings shall include: a) Cumulative net income less distributions or dividends b) Prior period adjustments c) Disclosed with reconciliation of beginning and ending balances

14.3 Treasury Stock (for corporations)

Treasury Stock shall be: a) Recorded at cost of repurchased shares b) Presented as a reduction of shareholders' equity c) Disclosed with number of shares and average cost

14.4 Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income shall include: a) Cumulative foreign currency translation adjustments b) Unrealized gains and losses on available-for-sale securities c) Pension and post-retirement benefit plan adjustments d) Cash flow hedge gains and losses e) Disclosed with components and changes during the period

14.5 Non-controlling Interests

Non-controlling Interests shall include: a) Portion of equity in subsidiaries not attributable to the parent company b) Disclosed with reconciliation of beginning and ending balances

15. Balance Sheet Equation Verification

15.1 Equation Balance

The balance sheet shall be verified to ensure: Total Assets = Total Liabilities + Total Equity

15.2 Cross-reference Verification

Balance sheet accounts shall be cross-referenced with: a) Supporting schedules and subsidiary ledgers b) Related income statement accounts c) Related cash flow statement accounts d) Notes to financial statements

15.3 Comparative Presentation

Balance sheet shall be presented with comparative figures from at least one prior period of equal length to facilitate trend analysis.

15.4 Classification Review

All accounts shall be reviewed to ensure proper classification as: a) Current vs. non-current b) Operating vs. non-operating c) Recurring vs. non-recurring

Cash Flow Statement

16. Operating Activities

16.1 Direct Method Components (if used)

Cash flows from operating activities using the direct method shall include: a) Cash received from customers b) Cash paid to suppliers and vendors c) Cash paid to employees d) Interest received e) Interest paid f) Income taxes paid g) Other operating cash receipts and payments

16.2 Indirect Method Components (if used)

Cash flows from operating activities using the indirect method shall include: a) Net income b) Adjustments for non-cash items: i. Depreciation and amortization ii. Deferred income taxes iii. Stock-based compensation iv. Gains or losses on asset disposals v. Impairment charges c) Adjustments for changes in working capital: i. Accounts receivable ii. Inventory iii. Prepaid expenses iv. Accounts payable v. Accrued expenses vi. Unearned revenue vii. Other current assets and liabilities

16.3 Supplemental Disclosures

Supplemental disclosures for operating activities shall include: a) Cash paid for interest b) Cash paid for income taxes c) Non-cash investing and financing activities

16.4 Reconciliation Requirement

If the direct method is used, a reconciliation of net income to net cash provided by operating activities shall also be provided.

17. Investing Activities

17.1 Capital Expenditures

Cash flows related to capital expenditures shall include: a) Purchases of property, plant, and equipment b) Purchases of intangible assets c) Capitalized software development costs d) Construction in progress expenditures

17.2 Business Acquisitions and Dispositions

Cash flows related to business acquisitions and dispositions shall include: a) Cash paid for acquisitions, net of cash acquired b) Cash proceeds from business dispositions, net of cash disposed c) Cash paid or received for contingent consideration

17.3 Investment Activities

Cash flows related to investment activities shall include: a) Purchases of investment securities b) Proceeds from sales and maturities of investment securities c) Loans made to others d) Collections of loans made to others

17.4 Other Investing Activities

Cash flows related to other investing activities shall include: a) Proceeds from sales of property, plant, and equipment b) Proceeds from sales of intangible assets c) Insurance recoveries for property damage d) Other significant investing cash flows

18. Financing Activities

18.1 Debt-related Activities

Cash flows related to debt shall include: a) Proceeds from short-term borrowings b) Repayments of short-term borrowings c) Proceeds from long-term debt issuance d) Principal payments on long-term debt e) Debt issuance costs paid

18.2 Equity-related Activities

Cash flows related to equity shall include: a) Proceeds from issuance of common stock b) Proceeds from issuance of preferred stock c) Repurchases of common stock d) Repurchases of preferred stock e) Dividends paid f) Distributions to partners or members g) Capital contributions from partners or members h) Capital withdrawals by partners or members

18.3 Lease-related Activities

Cash flows related to leases shall include: a) Principal payments on capital lease obligations b) Proceeds from sale-leaseback transactions

18.4 Other Financing Activities

Cash flows related to other financing activities shall include: a) Debt extinguishment costs b) Proceeds from exercise of stock options c) Employee taxes paid for withheld shares d) Other significant financing cash flows

19. Net Change in Cash

19.1 Calculation

Net Change in Cash shall be calculated as: Net Cash Provided by (Used in) Operating Activities

• Net Cash Provided by (Used in) Investing Activities
• Net Cash Provided by (Used in) Financing Activities = Net Increase (Decrease) in Cash and Cash Equivalents

19.2 Foreign Currency Impact

The effect of exchange rate changes on cash and cash equivalents held in foreign currencies shall be presented as a separate line item.

19.3 Presentation Requirements

Net Change in Cash shall be presented with: a) Comparative figures from at least one prior period of equal length b) Subtotals for each major category of cash flows c) Clear reconciliation to the change in cash and cash equivalents on the balance sheet

20. Cash Reconciliation

20.1 Beginning Cash Balance

Beginning Cash Balance shall: a) Match the ending cash balance from the prior period b) Include all cash and cash equivalents as defined in the balance sheet section c) Be presented as the starting point for the cash flow reconciliation

20.2 Ending Cash Balance

Ending Cash Balance shall: a) Equal Beginning Cash Balance plus Net Change in Cash b) Match the cash and cash equivalents amount on the balance sheet c) Be presented as the final line item on the cash flow statement

20.3 Restricted Cash Considerations

Changes in restricted cash shall be: a) Included in the appropriate section of the cash flow statement based on the nature of the restriction b) Disclosed with explanation of restrictions c) Reconciled to total cash and cash equivalents on the balance sheet

20.4 Supplemental Schedule

A supplemental schedule shall be provided reconciling: a) Cash and cash equivalents per balance sheet b) Restricted cash included in other balance sheet accounts c) Total cash, cash equivalents, and restricted cash per cash flow statement

Statement of Changes in Equity

21. Beginning Equity Balance

21.1 Components

Beginning Equity Balance shall include: a) For sole proprietorships and partnerships: i. Owner's or partners' capital accounts ii. Accumulated profits or losses b) For corporations: i. Common stock ii. Preferred stock iii. Additional paid-in capital iv. Retained earnings v. Treasury stock vi. Accumulated other comprehensive income c) For LLCs: i. Members' capital accounts ii. Accumulated profits or losses

21.2 Reconciliation to Prior Period

Beginning Equity Balance shall: a) Match the ending equity balance from the prior period b) Be adjusted for any prior period adjustments or accounting changes c) Be presented with comparative figures from at least one prior period of equal length

21.3 Disclosure Requirements

Beginning Equity Balance disclosures shall include: a) Detailed breakdown by equity component b) Explanation of any restatements or reclassifications c) Cross-reference to related notes

22. Net Income Addition

22.1 Net Income Incorporation

Net Income (or Net Loss) shall be: a) Transferred from the income statement b) Added to (or subtracted from) retained earnings or the appropriate equity account c) Presented as a separate line item in the statement of changes in equity

22.2 Allocation to Equity Components

Net Income shall be allocated to appropriate equity components: a) For sole proprietorships: To owner's capital account b) For partnerships: To partners' capital accounts according to profit-sharing ratio c) For corporations: To retained earnings d) For LLCs: To members' capital accounts according to operating agreement

22.3 Comprehensive Income Considerations

Comprehensive Income components shall be: a) Presented separately from net income b) Added to the appropriate accumulated other comprehensive income accounts c) Disclosed with detailed breakdown by component

23. Dividend Distributions

23.1 Types of Distributions

Dividend Distributions shall include: a) For corporations: i. Cash dividends on common stock ii. Cash dividends on preferred stock iii. Stock dividends iv. Property dividends b) For partnerships and LLCs: i. Partner or member distributions ii. Guaranteed payments to partners

23.2 Recording Requirements

Dividend Distributions shall be: a) Recorded as reductions to retained earnings or the appropriate equity account b) Presented as separate line items by type of distribution c) Disclosed with declaration dates, record dates, and payment dates for formal dividends

23.3 Dividend Policies

Dividend policy information shall be disclosed, including: a) Dividend frequency and timing b) Dividend payout ratio targets c) Dividend restrictions from debt covenants or regulatory requirements d) Special dividend considerations

24. Capital Contributions

24.1 Types of Contributions

Capital Contributions shall include: a) For sole proprietorships: Additional owner investments b) For partnerships: Partner capital contributions c) For corporations: i. Common stock issuances ii. Preferred stock issuances iii. Exercise of stock options or warrants iv. Conversion of convertible securities d) For LLCs: Member capital contributions

24.2 Recording Requirements

Capital Contributions shall be: a) Recorded as increases to the appropriate equity accounts b) Presented as separate line items by type of contribution c) Disclosed with number of shares or units and price per share or unit for formal issuances

24.3 Non-cash Contributions

Non-cash Capital Contributions shall be: a) Recorded at fair value of assets contributed b) Disclosed with description of assets contributed and valuation method

25. Ending Equity Balance

25.1 Calculation

Ending Equity Balance shall be calculated as: Beginning Equity Balance

• Net Income (or - Net Loss)
• Other Comprehensive Income

• Dividend Distributions

• Capital Contributions

• Capital Withdrawals

• Other Equity Transactions = Ending Equity Balance

25.2 Verification

Ending Equity Balance shall: a) Match the total equity amount on the balance sheet b) Be verified by recalculating each component c) Be cross-referenced to supporting schedules and notes

25.3 Presentation Requirements

Ending Equity Balance shall be presented with: a) Detailed breakdown by equity component b) Comparative figures from at least one prior period of equal length c) Clear reconciliation of all changes during the period

Notes to Financial Statements

26. Accounting Policies

26.1 Basis of Presentation

The basis of presentation disclosure shall include: a) Accounting framework used (GAAP, IFRS, or other) b) Basis of accounting (accrual or cash) c) Fiscal year and reporting period d) Reporting currency e) Rounding conventions

26.2 Revenue Recognition

Revenue recognition policy disclosure shall include: a) Timing of revenue recognition by revenue stream b) Measurement of revenue (gross vs. net presentation) c) Treatment of multiple element arrangements d) Customer incentives and consideration payable e) Contract modification policies

26.3 Inventory Valuation

Inventory valuation policy disclosure shall include: a) Cost flow assumption (FIFO, LIFO, weighted average) b) Lower of cost or market methodology c) Inventory reserve policies d) Treatment of overhead allocation e) Consignment inventory treatment

26.4 Property, Plant, and Equipment

Property, plant, and equipment policy disclosure shall include: a) Capitalization thresholds b) Depreciation methods by asset class c) Estimated useful lives by asset class d) Residual value assumptions e) Repair and maintenance policies f) Impairment testing approach

26.5 Intangible Assets

Intangible assets policy disclosure shall include: a) Recognition criteria b) Amortization methods for finite-lived intangibles c) Estimated useful lives by intangible asset class d) Impairment testing approach for indefinite-lived intangibles e) Internal research and development cost treatment

26.6 Leases

Lease policy disclosure shall include: a) Lease classification criteria b) Operating lease accounting c) Capital/finance lease accounting d) Sale-leaseback transaction treatment e) Lease incentive treatment

26.7 Income Taxes

Income tax policy disclosure shall include: a) Tax filing status b) Deferred tax recognition and measurement c) Valuation allowance methodology d) Uncertain tax position recognition e) Foreign income tax treatment

26.8 Foreign Currency

Foreign currency policy disclosure shall include: a) Functional currency determination b) Foreign currency transaction treatment c) Translation of foreign entity financial statements d) Hedging policies for foreign exchange risk

27. Significant Judgments and Estimates

27.1 Allowance for Doubtful Accounts

Allowance for doubtful accounts disclosure shall include: a) Methodology for estimating uncollectible accounts b) Aging categories and reserve percentages c) Historical collection experience d) Specific identification criteria e) Changes in estimation methodology

27.2 Inventory Obsolescence

Inventory obsolescence disclosure shall include: a) Methodology for identifying obsolete inventory b) Aging or turnover thresholds c) Market value determination d) Historical obsolescence experience e) Changes in estimation methodology

27.3 Asset Impairment

Asset impairment disclosure shall include: a) Triggering events that prompt impairment testing b) Asset grouping for impairment testing c) Fair value determination methodology d) Key assumptions in impairment models e) Sensitivity of estimates to changes in assumptions

27.4 Warranty Reserves

Warranty reserve disclosure shall include: a) Methodology for estimating warranty obligations b) Historical warranty claim experience c) Product-specific warranty terms d) Changes in estimation methodology e) Sensitivity of estimates to changes in assumptions

27.5 Legal and Contingent Liabilities

Legal and contingent liability disclosure shall include: a) Methodology for assessing probability of loss b) Estimation approach for probable losses c) Materiality thresholds for disclosure d) Key assumptions in liability calculations e) Sensitivity of estimates to changes in assumptions

27.6 Pension and Post-retirement Benefits

Pension and post-retirement benefit disclosure shall include: a) Actuarial methods used b) Discount rate determination c) Expected return on plan assets d) Compensation increase assumptions e) Healthcare cost trend assumptions f) Mortality and turnover assumptions g) Sensitivity of obligations to changes in key assumptions

28. Debt Disclosures

28.1 Debt Instruments

Debt instrument disclosure shall include: a) Types of debt (term loans, lines of credit, bonds, notes) b) Principal amounts by debt instrument c) Interest rates (fixed or variable) d) Maturity dates e) Payment schedules f) Debt issuance costs and amortization

28.2 Debt Covenants

Debt covenant disclosure shall include: a) Financial covenants and required ratios b) Operational covenants and restrictions c) Covenant compliance status d) Consequences of covenant violations e) Covenant waiver or modification information

28.3 Collateral and Guarantees

Collateral and guarantee disclosure shall include: a) Assets pledged as collateral b) Personal guarantees by owners or officers c) Cross-collateralization arrangements d) Cross-default provisions e) Guarantee limitations or conditions

28.4 Debt Maturities

Debt maturity disclosure shall include: a) Scheduled principal payments for each of the next five years b) Aggregate principal payments thereafter c) Balloon payment amounts and timing d) Early repayment options and penalties e) Refinancing plans for near-term maturities

28.5 Lines of Credit

Line of credit disclosure shall include: a) Total available credit b) Amount drawn c) Unused available credit d) Expiration dates e) Renewal terms and conditions f) Commitment fees and unused line fees

29. Related Party Transactions

29.1 Related Party Identification

Related party identification shall include: a) Owners, shareholders, members, or partners with significant influence b) Directors, officers, and key management personnel c) Immediate family members of individuals identified above d) Entities controlled by or under common control with the business e) Affiliates, subsidiaries, and parent companies

29.2 Transaction Types

Related party transaction disclosure shall include: a) Sales of goods or services to related parties b) Purchases of goods or services from related parties c) Loans to or from related parties d) Lease arrangements with related parties e) Guarantees provided to or received from related parties f) Management fees or royalty arrangements g) Asset transfers between related parties

29.3 Transaction Terms

Related party transaction term disclosure shall include: a) Transaction amounts b) Outstanding balances c) Payment terms and conditions d) Interest rates on loans e) Collateral provided or received f) Comparison to arm's length terms g) Business purpose of the transactions

29.4 Management Compensation

Management compensation disclosure shall include: a) Salaries and wages b) Bonuses and incentive compensation c) Deferred compensation arrangements d) Stock-based compensation e) Perquisites and other personal benefits f) Post-employment benefits g) Termination benefits

30. Contingent Liabilities

30.1 Legal Proceedings

Legal proceeding disclosure shall include: a) Nature of the litigation b) Progress of the case c) Anticipated timing of resolution d) Range of potential loss or statement that estimation is not possible e) Probability assessment (remote, reasonably possible, or probable) f) Accrued amounts for probable losses g) Insurance coverage applicable to the claim

30.2 Environmental Matters

Environmental matter disclosure shall include: a) Nature of environmental obligations b) Regulatory requirements and compliance status c) Remediation plans and progress d) Range of potential costs or statement that estimation is not possible e) Probability assessment f) Accrued amounts for probable losses g) Insurance or indemnification coverage

30.3 Guarantees

Guarantee disclosure shall include: a) Nature of the guarantee b) Maximum potential amount under the guarantee c) Current carrying amount of the liability d) Term of the guarantee e) Recourse provisions f) Collateral held g) Events or circumstances that would require performance

30.4 Product Warranties

Product warranty disclosure shall include: a) Warranty terms and coverage b) Methodology for estimating warranty obligations c) Warranty reserve balance d) Warranty expense for the period e) Warranty claims paid during the period f) Changes in warranty reserve during the period

30.5 Other Contingencies

Other contingency disclosure shall include: a) Nature of the contingency b) Estimated financial effect or statement that estimation is not possible c) Probability assessment d) Timing of potential resolution e) Factors that may affect the ultimate outcome

31. Subsequent Events

31.1 Recognized Subsequent Events

Recognized subsequent event disclosure shall include: a) Nature of the event b) Financial statement impact c) Accounting treatment applied d) Date of the event

31.2 Non-recognized Subsequent Events

Non-recognized subsequent event disclosure shall include: a) Nature of the event b) Estimate of financial effect or statement that estimation is not possible c) Reason for non-recognition d) Date of the event

31.3 Date Through Which Subsequent Events Evaluated

The financial statements shall disclose the date through which subsequent events have been evaluated.

31.4 Types of Subsequent Events

Subsequent event disclosure shall address significant events such as: a) Business combinations b) Disposals of business segments c) Casualty losses d) Significant new debt or equity issuances e) Debt covenant violations or waivers f) Litigation settlements g) Changes in business conditions affecting asset valuations h) Restructuring plans

Financial Analysis

32. Liquidity Ratios

32.1 Current Ratio

Current Ratio shall be: a) Calculated as: Current Assets ÷ Current Liabilities b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of business cycle and seasonality

32.2 Quick Ratio

Quick Ratio shall be: a) Calculated as: (Cash + Cash Equivalents + Short-term Investments + Accounts Receivable) ÷ Current Liabilities b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of collection cycles and payment terms

32.3 Cash Ratio

Cash Ratio shall be: a) Calculated as: (Cash + Cash Equivalents) ÷ Current Liabilities b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of cash management strategies

32.4 Working Capital

Working Capital shall be: a) Calculated as: Current Assets - Current Liabilities b) Presented with comparative figures from at least one prior period c) Analyzed relative to revenue and operational needs d) Interpreted with consideration of growth plans and seasonal requirements

32.5 Operating Cash Flow Ratio

Operating Cash Flow Ratio shall be: a) Calculated as: Operating Cash Flow ÷ Current Liabilities b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of earnings quality and cash conversion

33. Profitability Ratios

33.1 Gross Margin

Gross Margin shall be: a) Calculated as: (Revenue - Cost of Goods Sold) ÷ Revenue b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of pricing strategy and cost structure

33.2 Operating Margin

Operating Margin shall be: a) Calculated as: Operating Income ÷ Revenue b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of fixed vs. variable cost structure

33.3 Net Profit Margin

Net Profit Margin shall be: a) Calculated as: Net Income ÷ Revenue b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of tax strategy and capital structure

33.4 Return on Assets (ROA)

Return on Assets shall be: a) Calculated as: Net Income ÷ Average Total Assets b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of asset intensity and utilization

33.5 Return on Equity (ROE)

Return on Equity shall be: a) Calculated as: Net Income ÷ Average Shareholders' Equity b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of leverage and capital structure

33.6 Return on Invested Capital (ROIC)

Return on Invested Capital shall be: a) Calculated as: Net Operating Profit After Tax ÷ (Total Assets - Current Liabilities) b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks and weighted average cost of capital d) Interpreted with consideration of investment strategy and capital allocation

34. Efficiency Ratios

34.1 Inventory Turnover

Inventory Turnover shall be: a) Calculated as: Cost of Goods Sold ÷ Average Inventory b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of inventory management practices and product lifecycle

34.2 Days Inventory Outstanding

Days Inventory Outstanding shall be: a) Calculated as: 365 ÷ Inventory Turnover b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of supply chain efficiency and obsolescence risk

34.3 Accounts Receivable Turnover

Accounts Receivable Turnover shall be: a) Calculated as: Net Credit Sales ÷ Average Accounts Receivable b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of credit policies and collection effectiveness

34.4 Days Sales Outstanding

Days Sales Outstanding shall be: a) Calculated as: 365 ÷ Accounts Receivable Turnover b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of payment terms and customer quality

34.5 Accounts Payable Turnover

Accounts Payable Turnover shall be: a) Calculated as: Purchases ÷ Average Accounts Payable b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of vendor relationships and cash management

34.6 Days Payable Outstanding

Days Payable Outstanding shall be: a) Calculated as: 365 ÷ Accounts Payable Turnover b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of payment terms and cash flow management

34.7 Asset Turnover

Asset Turnover shall be: a) Calculated as: Revenue ÷ Average Total Assets b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of capital intensity and asset utilization

34.8 Fixed Asset Turnover

Fixed Asset Turnover shall be: a) Calculated as: Revenue ÷ Average Net Fixed Assets b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of capacity utilization and investment efficiency

35. Solvency Ratios

35.1 Debt-to-Equity Ratio

Debt-to-Equity Ratio shall be: a) Calculated as: Total Debt ÷ Total Equity b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of financial risk tolerance and capital structure strategy

35.2 Debt-to-Assets Ratio

Debt-to-Assets Ratio shall be: a) Calculated as: Total Debt ÷ Total Assets b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks d) Interpreted with consideration of asset financing strategy

35.3 Interest Coverage Ratio

Interest Coverage Ratio shall be: a) Calculated as: Earnings Before Interest and Taxes ÷ Interest Expense b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks and debt covenant requirements d) Interpreted with consideration of earnings volatility and debt service capacity

35.4 Fixed Charge Coverage Ratio

Fixed Charge Coverage Ratio shall be: a) Calculated as: (EBIT + Lease Payments) ÷ (Interest Expense + Lease Payments) b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks and debt covenant requirements d) Interpreted with consideration of fixed financial obligations beyond interest

35.5 Debt Service Coverage Ratio

Debt Service Coverage Ratio shall be: a) Calculated as: Operating Income ÷ Total Debt Service b) Presented with comparative figures from at least one prior period c) Analyzed relative to industry benchmarks and lender requirements d) Interpreted with consideration of cash flow adequacy for debt obligations

36. Trend Analysis

36.1 Revenue Trend Analysis

Revenue trend analysis shall include: a) Year-over-year growth rates for at least three years b) Compound annual growth rate (CAGR) c) Seasonal patterns and adjustments d) Comparison to industry growth rates e) Analysis by product line, service category, or business segment

36.2 Margin Trend Analysis

Margin trend analysis shall include: a) Year-over-year changes in gross margin, operating margin, and net margin b) Identification of margin expansion or compression factors c) Correlation with volume changes, pricing changes, and cost structure changes d) Comparison to industry margin trends

36.3 Expense Trend Analysis

Expense trend analysis shall include: a) Year-over-year changes in major expense categories b) Expenses as a percentage of revenue over time c) Fixed vs. variable expense trends d) Identification of expense management opportunities e) Comparison to industry expense benchmarks

36.4 Balance Sheet Trend Analysis

Balance sheet trend analysis shall include: a) Year-over-year changes in major asset and liability categories b) Common-size analysis (each item as a percentage of total assets) c) Working capital trend analysis d) Asset composition changes over time e) Liability and equity composition changes over time

36.5 Cash Flow Trend Analysis

Cash flow trend analysis shall include: a) Year-over-year changes in operating, investing, and financing cash flows b) Free cash flow trends c) Cash conversion cycle trends d) Capital expenditure trends relative to depreciation e) Dividend and distribution trends relative to net income

Compliance and Standards

37. Accounting Standards Compliance

37.1 Framework Identification

The financial statements shall clearly identify the accounting framework applied: a) Generally Accepted Accounting Principles (GAAP) b) International Financial Reporting Standards (IFRS) c) Tax basis of accounting d) Cash basis of accounting e) Modified cash basis of accounting f) Other comprehensive basis of accounting

37.2 Compliance Statement

The financial statements shall include an explicit statement of compliance with the identified framework.

37.3 Departures from Standards

Any departures from the identified framework shall be: a) Clearly disclosed b) Explained with rationale for the departure c) Quantified as to financial impact where practicable

37.4 Recent Pronouncements

The financial statements shall disclose: a) Recently issued accounting standards not yet adopted b) Expected impact of future adoption c) Planned implementation timing

37.5 Accounting Changes

Changes in accounting principles, estimates, or error corrections shall be: a) Clearly disclosed b) Explained with rationale for the change c) Quantified as to financial impact d) Applied retrospectively or prospectively as appropriate under the framework

38. Industry-Specific Disclosures

38.1 Industry Identification

The financial statements shall identify the primary industry or industries in which the business operates.

38.2 Industry-Specific Metrics

The financial statements shall include industry-specific metrics relevant to the business, such as: a) For retail: Same-store sales, sales per square foot, inventory shrinkage b) For manufacturing: Capacity utilization, order backlog, raw material usage c) For services: Billable hours, utilization rates, client retention d) For technology: Recurring revenue, customer acquisition cost, lifetime value e) For real estate: Occupancy rates, rent per square foot, funds from operations

38.3 Industry-Specific Accounting Policies

The financial statements shall disclose industry-specific accounting policies, such as: a) For construction: Percentage-of-completion methodology b) For software: Revenue recognition for multiple element arrangements c) For financial services: Loan loss reserve methodology d) For healthcare: Patient service revenue recognition e) For hospitality: Loyalty program accounting

38.4 Industry Regulatory Disclosures

The financial statements shall include disclosures required by industry-specific regulations, such as: a) For financial institutions: Capital adequacy ratios b) For healthcare: Compliance with Medicare and Medicaid regulations c) For energy: Environmental compliance and asset retirement obligations d) For transportation: Safety compliance and operating statistics e) For government contractors: Contract compliance and backlog

39. Regulatory Compliance

39.1 Entity Structure Compliance

The financial statements shall comply with requirements specific to the business's legal structure: a) For corporations: Shareholder equity requirements b) For partnerships: Partner capital account requirements c) For LLCs: Member equity requirements d) For sole proprietorships: Owner's equity requirements e) For non-profit organizations: Net asset classification requirements

39.2 Size-Based Requirements

The financial statements shall comply with requirements based on the business's size: a) For public companies: SEC reporting requirements b) For private companies: GAAP alternatives permitted under the Private Company Council c) For small businesses: Simplified reporting options where permitted d) For micro-entities: Minimum disclosure requirements

39.3 Tax Compliance Disclosures

The financial statements shall include disclosures related to tax compliance: a) Income tax filing status b) Tax years open to examination c) Uncertain tax positions d) Tax credits and incentives e) Tax planning strategies with financial statement impact

39.4 Regulatory Agency Disclosures

The financial statements shall include disclosures required by applicable regulatory agencies: a) Securities and Exchange Commission (for public companies) b) Federal and state banking regulators (for financial institutions) c) Insurance commissioners (for insurance companies) d) Federal Communications Commission (for telecommunications companies) e) Other industry-specific regulatory bodies

Appendices

Appendix A: Financial Statement Templates

A.1 Income Statement Template

[COMPANY NAME]
Income Statement
For the [Period] Ended [Date]

                                    Current Period    Prior Period    % Change
Revenue:
  Product Sales                     $                $               %
  Service Revenue                   $                $               %
  Other Revenue                     $                $               %
Total Revenue                       $                $               %

Cost of Goods Sold:
  Materials                         $                $               %
  Direct Labor                      $                $               %
  Manufacturing Overhead            $                $               %
Total Cost of Goods Sold            $                $               %

Gross Profit                        $                $               %
Gross Margin                        %                %               

Operating Expenses:
  Selling Expenses                  $                $               %
  General & Administrative          $                $               %
  Research & Development            $                $               %
  Depreciation & Amortization       $                $               %
Total Operating Expenses            $                $               %

Operating Income                    $                $               %
Operating Margin                    %                %               

Other Income (Expense):
  Interest Income                   $                $               %
  Interest Expense                  $                $               %
  Other Income (Expense)            $                $               %
Total Other Income (Expense)        $                $               %

Income Before Taxes                 $                $               %
Income Tax Provision                $                $               %
Effective Tax Rate                  %                %               

Net Income                          $                $               %
Net Profit Margin                   %                %               

A.2 Balance Sheet Template

[COMPANY NAME]
Balance Sheet
As of [Date]

                                    Current Period    Prior Period    % Change
ASSETS
Current Assets:
  Cash and Cash Equivalents         $                $               %
  Short-term Investments            $                $               %
  Accounts Receivable, net          $                $               %
  Inventory                         $                $               %
  Prepaid Expenses                  $                $               %
  Other Current Assets              $                $               %
Total Current Assets                $                $               %

Non-Current Assets:
  Property, Plant & Equipment       $                $               %
  Less: Accumulated Depreciation    $                $               %
  Net Property, Plant & Equipment   $                $               %
  Intangible Assets, net            $                $               %
  Goodwill                          $                $               %
  Other Non-Current Assets          $                $               %
Total Non-Current Assets            $                $               %

TOTAL ASSETS                        $                $               %

LIABILITIES AND EQUITY
Current Liabilities:
  Accounts Payable                  $                $               %
  Short-term Debt                   $                $               %
  Current Portion of Long-term Debt $                $               %
  Accrued Expenses                  $                $               %
  Unearned Revenue                  $                $               %
  Other Current Liabilities         $                $               %
Total Current Liabilities           $                $               %

Non-Current Liabilities:
  Long-term Debt                    $                $               %
  Deferred Tax Liabilities          $                $               %
  Other Non-Current Liabilities     $                $               %
Total Non-Current Liabilities       $                $               %

TOTAL LIABILITIES                   $                $               %

Equity:
  [Appropriate Equity Accounts]     $                $               %
  Retained Earnings                 $                $               %
  Other Equity                      $                $               %
Total Equity                        $                $               %

TOTAL LIABILITIES AND EQUITY        $                $               %

A.3 Cash Flow Statement Template

[COMPANY NAME]
Statement of Cash Flows
For the [Period] Ended [Date]

                                    Current Period    Prior Period    % Change
OPERATING ACTIVITIES
Net Income                          $                $               %
Adjustments to reconcile net income to net cash:
  Depreciation and Amortization     $                $               %
  Deferred Income Taxes             $                $               %
  Stock-based Compensation          $                $               %
  Other Non-cash Items              $                $               %
Changes in operating assets and liabilities:
  Accounts Receivable               $                $               %
  Inventory                         $                $               %
  Prepaid Expenses                  $                $               %
  Accounts Payable                  $                $               %
  Accrued Expenses                  $                $               %
  Unearned Revenue                  $                $               %
  Other Operating Assets/Liabilities$                $               %
Net Cash from Operating Activities  $                $               %

INVESTING ACTIVITIES
Capital Expenditures                $                $               %
Business Acquisitions               $                $               %
Proceeds from Asset Sales           $                $               %
Purchases of Investments            $                $               %
Sales/Maturities of Investments     $                $               %
Other Investing Activities          $                $               %
Net Cash from Investing Activities  $                $               %

FINANCING ACTIVITIES
Proceeds from Debt                  $                $               %
Repayment of Debt                   $                $               %
Dividends/Distributions Paid        $                $               %
Capital Contributions               $                $               %
Stock Repurchases                   $                $               %
Other Financing Activities          $                $               %
Net Cash from Financing Activities  $                $               %

Net Increase (Decrease) in Cash     $                $               %
Cash at Beginning of Period         $                $               %
Cash at End of Period               $                $               %

Supplemental Disclosures:
  Cash Paid for Interest            $                $               %
  Cash Paid for Income Taxes        $                $               %
  Non-cash Investing/Financing      $                $               %

A.4 Statement of Changes in Equity Template

[COMPANY NAME]
Statement of Changes in Equity
For the [Period] Ended [Date]

                                    [Appropriate Equity Accounts]    Retained    Other      Total
                                                                    Earnings    Equity     Equity
Balance at Beginning of Period      $                               $           $          $
  Net Income                                                        $                      $
  Other Comprehensive Income                                                    $          $
  Dividends/Distributions                                           $                      $
  Capital Contributions             $                                                      $
  Stock-based Compensation          $                                                      $
  Other Equity Transactions         $                               $           $          $
Balance at End of Period            $                               $           $          $

Appendix B: Financial Ratio Formulas

B.1 Liquidity Ratios

• Current Ratio = Current Assets ÷ Current Liabilities
• Quick Ratio = (Cash + Cash Equivalents + Short-term Investments + Accounts Receivable) ÷ Current Liabilities
• Cash Ratio = (Cash + Cash Equivalents) ÷ Current Liabilities
• Working Capital = Current Assets - Current Liabilities
• Operating Cash Flow Ratio = Operating Cash Flow ÷ Current Liabilities

B.2 Profitability Ratios

• Gross Margin = (Revenue - Cost of Goods Sold) ÷ Revenue
• Operating Margin = Operating Income ÷ Revenue
• Net Profit Margin = Net Income ÷ Revenue
• Return on Assets (ROA) = Net Income ÷ Average Total Assets
• Return on Equity (ROE) = Net Income ÷ Average Shareholders' Equity
• Return on Invested Capital (ROIC) = Net Operating Profit After Tax ÷ (Total Assets - Current Liabilities)

B.3 Efficiency Ratios

• Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
• Days Inventory Outstanding = 365 ÷ Inventory Turnover
• Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable
• Days Sales Outstanding = 365 ÷ Accounts Receivable Turnover
• Accounts Payable Turnover = Purchases ÷ Average Accounts Payable
• Days Payable Outstanding = 365 ÷ Accounts Payable Turnover
• Asset Turnover = Revenue ÷ Average Total Assets
• Fixed Asset Turnover = Revenue ÷ Average Net Fixed Assets

B.4 Solvency Ratios

• Debt-to-Equity Ratio = Total Debt ÷ Total