Financial Statements Quotes

“Discounted Cash Flow The discounted cash flow method of valuation is the most sophisticated (and the most difficult) method to use in valuing the business. With this method you must estimate all the cash influxes to investors over time (dividends and ultimate stock sales) and then compute a “net present value” using an assumed discount rate (implied interest rate).”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“Liquidation Value The liquidation value is what the company’s assets would bring at a forced sale. Normally the liquidation value of a going concern has little relevance since the value of an operating business is much greater than its liquidation value.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“Book Value Book value represents the value at which assets are carried on the “books” of the company. The book value of a company is defined as its total assets less its current liabilities and less any long-term debt.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“SHAREHOLDERS’ EQUITY has two components: CAPITAL STOCK: The original amount of money the owners contributed as their investment in the stock of the company. RETAINED EARNINGS: All the earnings of the company that have been retained, that is, not paid out as dividends to owners.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“The company’s working capital is the amount of money left over after you subtract current liabilities from current assets.
Current Assets  –  Current Liabilities  =  Working Capital”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“If during the review of a corporation’s books, the accountant has reason to believe that the company may go bankrupt, he must issue a “qualified opinion” stating the potential of the company’s demise. More on this concept later.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“1. Accounting Entity The accounting entity is the business unit (regardless of the legal business form) for which the financial statements are being prepared. The accounting entity principle states that there is a “business entity” separate from its owners … a fictional “person” called a company for which the books are written.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“even if it’s boring and dull and soon to be forgotten, continue to learn double-entry bookkeeping. People think I’m joking, but I’m not. You should love the mathematics of business.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

“2. Going Concern Unless there is evidence to the contrary, accountants assume that the life of the business entity is infinitely long. Obviously this assumption cannot be verified and is hardly ever true. But this assumption does greatly simplify the presentation of the financial position of the firm and aids in the preparation of financial statements.”
― Thomas R. Ittelson, Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports