This time we will look a bit more in depth on how to use Microsoft Excel for financial calculations.

What we will look at today is Financial statements and how to use them in order to understand the financial health of a company.

In particular we will look at:

• Financial statements
  • Balance sheet
  • Income statement
• The basic difference between accounting (or book) value and market value.
• The difference between accounting income and cash flow.
• How to determine a firm’s cash flow from its financial statements.
  • Calculate cash flow.
• The difference between average and marginal tax rates.
  • Calculate taxes

Finance not accounting

The first thing to grasp is that we will look at the numbers and look at them through the eyes of people in finance.

They use the numbers differently than the people in accounting and we will show you how.

Balance sheet

In the last article we talked about this formula:

Assets = Liabilities + Equity

Everyone in finance is using this equation and not just in finance but also in accounting.

What the Balance sheet does is that it reflects the equation.

The Balance sheet is a snapshot of the Firm’s account balances at the last day of the reporting period.

This article is one in a series. You can read Part 1 here and Part 2 here.

The post How to use Microsoft Excel in finance – Part 3 appeared first on LJ Nissen's blog.