How to Read Visual Finance

The Income Statement Equation: Sales - Expenses = Profit

  • Sales and other revenues (e.g. Investment or Adjustments) are represented by gold stacks
  • Cost of Goods Sold (or Cost of Sales) are represented by blue stacks.
  • Cash Expenses are represented by silver stacks.
  • Depreciation and Amortization are epresented by copper stacks.
  • Net Income (Profit for the period) is represented by black stacks. (A loss is outlined in red)

The Balance Sheet Equation: Assets = Liabilities + Equity

  • Current Assets include:
    • Cash, Receivable, and Other which are represented by silver stacks.
    • Inventories which are represented by blue stacks.

Days Sale Outstanding is automatically calculated:

  • Fixed Assets are epresented by copper stacks.
    Liabilities are represented by red stacks.
    Equity are represented by black stacks. (Negative equity is outlined in red)

Key Ratios in Visual Finance

  • Return on Sales (ROS) shows what percentage of the sales revenue is left after you have paid costs and expenses.

ROS = Net Income/Sales x 100%

  • Return on Assets (ROA) measures how effectively the assets are employed in the business.

ROA = Net Income/Assets x 100%

  • Asset Turnover (Asset Turns) tells you how many times you ‘turned over’ your assets during the period.

ATO = Sales/Assets

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How to Read Visual Finance
How to Read Visual Finance

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