This is just a brief example of the accounting dynamic duo in action.
#Cashflow game balance sheet guide how to#
For example, Steam had a profitable year (from the income statement) and their assets outweigh their liabilities (from the balance sheet) which puts them in a strong financial position.įurther reading: How to Read (and Analyze) Financial Statements The bottom line The information you can get about a company from both the income statement and balance sheet is useful. Listed after assets, the liabilities category includes both short-term liabilities (money you need to pay back before the end of the the year) and long-term liabilities (money it will take you more than a year to pay off).Ĭontinuing with the example from video game maker Steam, their asset categories are totaled and listed as follows:
Listed before liabilities, the assets category includes both tangible assets (cash, inventory, real estate, company stock) and intangible assets (trademarks, patents, reputation, your client list).
Instead of expenses, you add up your liabilities.Instead of revenue, you add up your assets.Preparing a balance sheet is similar to preparing an income statement-with three major differences: That information tells you what your company is worth at a specific point in time. In other words, your company’s balance sheet shows you your current assets, current liabilities, and owner’s equity (or shareholders equity if you’re a corporation). The balance sheet tells you what you own, what you owe, and what’s left over. The next financial statement, the balance sheet, helps tie together what the retained earnings mean to the overall value of the company. In order to know how much cash you have to work with, you need to prepare cash flow statements. Heads up: If your business uses the accrual method of accounting, your income statements report assets and expenses as they’re incurred, rather than when you actually earn or spend cash. The income statement shows that Steam was able to earn $53 million dollars for the year. In this case, it’s beef jerky to feed hungry game developers.įinally, with revenues and expenses accounted for, we calculate the net profit by subtracting expenses ($97M) from revenues ($150M):
#Cashflow game balance sheet guide plus#
We still have high Revenue but quite difficult to increase ROE, because we can not get much higher Net Profit.The accountants track expenses related directly to game development, plus other expenses they need to keep their business running. The other option is high volume, we have to build larger factories, in this case we will see total Equity is high. We prefer high quality, because we can charge higher price, then we have more room to set price, and gain Higher Net Profit. Do not expand to fast, otherwise Net Profit can not keep up with total Equity, the ROE can reduce. Looking at the report, we can get over view of all assets and liabilities of company, we can keep track of details inside Total Equity, then we can keep control of ROE. When we do not have enough cash in hand, we need to borrow some in case we can pay the expenses, we need to pay high interest. We can borrow when we need money to expand factories.We often give small sum, eg 0.1 for Year 11 and 0.2 for Year 12, increasing every year. We can scan all the details to see information about: Debts, Stocks, Repurchase Stock to increase EPS when we have lots of Cash, giving dividends to investors.We can check current Debts and their Interest Rates in the Fianacial Report, Borrow new loans and pay off current debts, to increase Credit Rating.We can use this table to make decisions about:
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