Finance for Non Finance Managers: The P&L, Balance Sheet & Cash Flow #Finance

hello my name is Steve carile from clearly trending and uh you’re watching the first in our Finance for the non-

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance managers CashNews.co series so this is this is a series of CashNews.cos for managers you might be a manager you might be a director you might just be an employee but or you might you might be running your own

company yeah you might be doing that and you just want to know more about Finance you want to know more about the world of color: #1a73e8; text-decoration: none;">Finance more about how things fit together and what the terminology means so this is this is our our first CashNews.co and today I’m going to be talking about uh why we have Financial Statements on what the Financial

Statements are oh by the way I’m assisted here standing behind the camera you can’t see him it’s Charlie and Charlie’s going to put up some little reminders for you of the things that I say to help you follow the CashNews.co so first thing I’m going to talk

about what do Financial Statements tell us or Financial Statements or or accounts those two phrases mean the same thing and actually there’s a lot of phrases in text-decoration: none;">Finance in the world of Finance that actually mean exactly the same thing and when we come across some of those I’m going to tell

you what they are so the first one is accounts Financial Statements basically mean the same thing Financial Statements is just a fancier term to mean exactly the same thing so what do we get in a set of Financial Statements and what do

Financial Statements tell us well the first thing is and Charlie probably going to pop this up right there I would guess just about there Charlie yeah uh the first thing is financial stats tell us about performance and that’s the first thing it’s the most important

thing so performance means how have we performed over a period of time so that might be a month so how have we performed from the beginning of the month to the end of the month or it might be uh a quarter from the beginning of the quarter to the end of the quarter or it might be six months or it

might be a whole year we want to know how we’ve performed the performance means what have we earned what is our Income in that period what have we incurred and of course what we’ve earned less what we’ve incurred in in costs gives us our Profit or

loss if we’ve earned more than we’ve incurred we’ve got a Profit and if we’ve incurred more costs than we’ve earned then we’ve got a loss oh never mind yeah so that’s the first thing the most important thing that financial statement show us

and the second thing that they can show us is our position our position where were we at a particular point in time so position is is a destination where we arrived yeah so Financial Statements tell us where we are right now in terms of what in terms of our Assets

and our Liabilities Assets are things you own and Liabilities of things you owe so second thing we need to know about an organization is what is its position what is its financial position in terms of its Assets and

Liabilities and the third thing those Financial Statements tell us is they tell us about the Liquidity that’s a funny phrase Liquidity suppose it’s the first technical phrase so Liquidity is all about

the amount of cash you’ve got how much cash do we have and how much cash do we have to pay out in the short term and how much access to Future cash do we have that’s the third thing that we’d like to know about a business because businesses need cash to survive in the short term

we need to be able to pay our bills and our wages yeah we need to be able to pay ourselves if we own the business okay so let’s let’s move on now and look at actually what we call those those three three different views of the the business okay let’s so let’s have a look now

at the names that we give to these three statements so first of all we’ve got this statement of performance that’s actually got a number of different names depending on where you are depending on whether you’re in the private sector or whether you’re in the public sector

whether in you’re in the UK or whether you’re in the US or China wherever you are has different names so the most common name colloquial name I suppose is the Profit and loss account sometimes abbreviated to the p&l secondly the statement is also known as the

Income statement and it’s the same thing it doesn’t just show your Income by the way it shows your Income and expenditure but it’s often referred to as the Income statement and certainly if you’re a large

business a business quoted on a Stock Exchange anywhere in the world then you will call it an Income statement and the third name usually used by the public sector is the Income and expenditure statement sometimes if you uh produce a

Profit and loss account or Income statement internally and you show it to your managers and you show your managers to so that they can track their performance you show them their own version of the Profit and loss account it’s known as the

management accounts okay and the Profit and loss account or Income statement is a little bit like a CashNews.co so it shows what’s happened from the beginning to the end of a period yeah shows what Income and expenditure you’ve had

during that period the statement of position is called the Balance Sheet and that shows your Assets and Liabilities at a particular point in time so it might show what your Assets and Liabilities were on the 31st

of December if that’s the date that your financial year ends or what your Assets and Liabilities were on the 31st of March if that’s the date your financial year ends you can produce a Balance Sheet at any point in time and what it

shows you hey this is interesting it’s a little bit like a photograph and it’s sometimes known the Balance Sheet as a snapshot in time it’s like a photograph it’s like a financial photo of your business and it shows you the Assets and

Liabilities you had at that one particular point in time and just like a photo it’s always out of date as soon as it’s taken it’s out of date you might look back at photog graphs of yourself from 10 years ago and you look completely different now same with the

Balance Sheet if you if you prepare a Balance Sheet on the 31st of December by the 2nd of January the Assets and Liabilities you have will have changed so we we often refer to it as the snapshot in time the Balance

Sheet one other thing about the Balance Sheet it also has another name it other name is the statement of financial position and certainly if you are looking at the Financial Statements of a of a quoted company a company that’s has its

Shares quoted on the Stock Exchange it will C its Balance Sheet statement of financial position just a different name for the same thing the third statement and probably the least important from our point of view as accountants is the Cash

Flow statement Cash Flow statement is very simple it just shows the cash coming in and the cash going out it’s like a CashNews.co as well it shows what’s happened from the beginning of the period to the end of the period but it shows what’s happened in

terms of the cash receipts and payments so let me just have a look at those three things just to recap a Profit and loss account first of all Profit and loss account shows Income and expenditure Charlie it shows the difference between the

Income and expenditure if you’ve got more Income than expenditure you got a Profit if you’ve got more expenditure than Income you’ve got a loss really important thing about the Income and

expenditure statement hey and I’m going to talk about this in the next presentation the next CashNews.co the Income and expenditure statement is prepared using the acrs principle funny word the acrs principle I’m going to tell you all about that in the next one have a

look at that one really really important fundamental for understanding what makes a set of accounts as I say the Profit and loss account has many names it’s also known as the Income statement the Income and expenditure statement and when

organizations produce them internally it’s known as the management accounts just a quick recap on the Balance Sheet the Balance Sheet shows Assets and Liabilities things you own which are Assets and things

you owe which your Liabilities just change one letter things you own and things you owe and it shows the difference between the things that you own and the things that you owe it also shows your funding what I mean by that the funding where does your money come from so usually the

money might come from the shareholders I’m going to talk more about that in one of the later CashNews.cos have a look at Balance Sheet one CashNews.co if you’re interested in that so it shows the funding where you’ve got the money from it also shows the reserves

that you’ve acred that you’ve accumulated over time since you started business have you accumulated any reserves and I’ll talk about how you accumulate reserves again when you have a look at that Balance Sheet CashNews.co finally the Balance Sheet

has also got uh another name it’s called the statement of financial position that’s a a more modern name and certainly all the large businesses in the world use that that name okay lastly we’ll have a look at that Cash Flow statement it’s a very simple

statement it shows your receipts and payments what you’ve received and what you’ve paid I’m listening to that you think hey that’s like my bank statement my bank statement shows that and yeah it does yeah cuz the Cash Flow statement is basically a bank

statement for the business it shows the cash coming in and the cash going out and it also shows what you had at the beginning and the end of the period just like your bank statement shows it is a very simple statement it’s essential to a business that they’ve got enough cash as

we’ll talk about later on when we look at Cash Flow and Liquidity and working Capital there’s another CashNews.co on that hey there’s loads to watch and basically that’s all I want to say for this CashNews.co so have a look

at the others have a look at the other ones have a look at the crues one and the Profit and loss one or the Balance Sheet one have a look at the liquid have a look at all of them they’re fantastic all right I’ll leave you there my name is Steve car

clearly training thank you bye-bye