Long Term Mindset

Financial Statements: Explained To A Child If you're in business, you MUST understand the 3 Financial Statements. Here's a quick overview: 📄 INCOME STATEMENT Main sections: 💰 REVENUE: Total Sales ➖ COST OF GOODS SOLD: The cost to deliver the product or service 💰 GROSS PROFIT: Revenue - Cost of Goods Sold ➖ OPERATING EXPENSES: All Overhead Costs 💰 OPERATING INCOME: Gross Profit - Operating Expenses ➖ OTHER INCOME: Money earned that is not core to the business 💰 PRE-TAX INCOME: Operating Income - Other Income ➖ INCOME TAX: Taxes paid to Governments 💰 NET INCOME: Pre-Tax Income - Income Tax 🔢 SHARES OUTSTANDING: The total number of shares a company has ➗ EARNINGS PER SHARE: Net Income / Shares Outstanding 👉 PURPOSE: Track Income & Expenses 🔀 SIMILAR TO: Your Monthly Budget ⏰ TIME: Period of Time 🔢 ACCOUNTING: Accrual 📄 𝐁𝐀𝐋𝐀𝐍𝐂𝐄 𝐒𝐇𝐄𝐄𝐓 3 Main Sections: 💰 ASSETS: What the company Owns 🔴 LIABILITIES: What the company Owes to creditors 🔵 EQUITY: The net value of the owner's claim ➗ FORMULA: Assets = Liabilities + Shareholder's Equity 👉 PURPOSE: Track what a company OWNS (assets) and OWES (liabilities) 🔀 SIMILAR TO: Your Net Worth statement ⏰ TIME: Point in Time Snapshot 🔢 ACCOUNTING: Accrual 📄 𝐂𝐀𝐒𝐇 𝐅𝐋𝐎𝐖 STATEMENT 3 Main sections: 💰 CASH FROM OPERATING ACTIVITIES All of the cash flows from activities related to operating the business 💰 CASH FROM INVESTING ACTIVITIES The cash movements from long-term assets 💰 CASH FROM FINANCING ACTIVITIES The cash from all equity investments and debt from the company 👉 PURPOSE: Track Cash Movements 🔀 SIMILAR TO: Your Checking Account ⏰ TIME: Period of Time 🔢 ACCOUNTING: Cash Which questions do you have? Let me know in the comments section. *** ➕ Follow Long Term Mindset for more content like this. Want to master the basics of accounting (for free)? Enroll in our email-based course: Financial Statements School Get started here (It's free) → https://lnkd.in/eKbRV7g6 If this post was helpful, repost it ♻️ to share with your audience.

Balance Sheet Post credit: Abdul Khaliq follow him! 52 Most Common Debits and Credits Debits and Credits are the foundation of the accounting system. Yet, they sometimes manage to confuse us from time to time. How often did you do that JE in your head before telling someone what account to debit or credit? I admit I had to make entries in my head before saying it out loud confidently. So here are the 52 most common debits and credits on your balance sheet. There could be hundreds more. What else can you add? Let me know if you need a high-resolution PDF for this one. 52 JE in the following balance sheet accounts:  1. Cash & Bank  2. Accounts Receivable  3. Inventory  4. Prepaid Expenses  5. Property, Plant, and Equipment  6. Less Accumulated Depreciation  7. Intangible Assets  8. Investments  9. Accounts Payable 10. Advances from Customers 11. Short-Term Loans 12. Income Taxes Payable 13. Accrued Expenses 14. Long-Term Debt 15. Deferred Income Tax 16. Owner's Equity 17. Retained Earnings          Follow Long Term Mindset for more content like this.          ***          P.S. Want to master the basics of accounting (for free)?          I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.          Check it out here (It's free) → https://lnkd.in/eKbRV7g6               If you found this post useful, please repost ♻️ to share with your audience

ROE vs ROA vs ROIC vs ROCE What's the difference? RETURN ON EQUITY (ROE) DEFINITION: Measures the return a company is earning in relation to its shareholder equity, indicating profit earned per dollar of equity. FORMULA: Net Income / Equity WHEN TO USE: When comparing companies in the same industry to each other that are primarily financed with equity. PROS: - Simple to calculate. - Reflects management effectiveness in using shareholder capital. CONS: - Can be misleading for companies with high debt levels. - Need to adjust for the effects of stock buybacks. BE AWARE OF: - Can be inflated by companies that are highly leveraged. - Can be inflated by buybacks. RETURN ON ASSETS (ROA) DEFINITION: Measures the return a company is earning in relation to its total assets, indicating profit earned per dollar of assets. FORMULA: Net Income / Average Total Assets WHEN TO USE: When comparing companies in the same industry to each other that have significant fixed assets. PROS: - Can be used across industries - Useful in assessing management’s effectiveness of using fixed assets. CONS: - It can be misleading for newer companies with non-earning assets. - Includes depreciation so it might be lower for capital-intensive businesses. BE AWARE OF: - Cross-industry comparisons. - Depreciation policies. RETURN ON INVESTED CAPITAL (ROIC) DEFINITION: Measure how efficiently a company uses its capital to generate profits. It focuses on the returns generated from the capital directly invested in the business. FORMULA: EBIT (1-tax) / (Long Term Debt + Equity - Non-Operating Cash) WHEN TO USE: When evaluating a company’s total capital efficiency in generating profits. PROS: -Focuses on core business efficiency. - Better for cross-industry comparisons. CONS: - Complex to calculate. - May overlook overall capital efficiency. BE AWARE OF: - Inaccuracies in calculating NOPAT - Variations in accounting practices RETURN ON CAPITAL EMPLOYED (ROCE) DEFINITION: Measures how efficiently a company is using all of its available capital, both equity and debt, to generate profits. FORMULA EBIT / (Long Term Debt + Equity) WHEN TO USE: When comparing the efficiency of different companies in using their capital. PROS: - Broader measure of capital efficiency. - Simple to calculate and understand. CONS: - Can be skewed by high debt levels. - Less effective for comparisons. BE AWARE OF: - Inconsistencies in definition -Sensitivity to short-term fluctuations *** ➕ Follow Long Term Mindset for more content like this. Want to master the basics of accounting (for free)? Enroll in our email-based course: Financial Statements School Get started here (It's free) → https://lnkd.in/eKbRV7g6 If this post was helpful, repost it ♻️ to share with your audience.

Steal this cheat sheet and get 80% more done! 1 simple trick to achieve more with less effort. Post by: Ben Meer - Give him a follow! 🎯 The Ultimate 80/20 Productivity Cheat Sheet by Eric Partaker 🎯 Check out these 30 real-world examples of the Pareto Principle in action. The 80/20 rule will help you and your team accomplish more while actually doing less. Why? Because... ➨ 20% of your effort will yield 80% of your results. ➨ 20% of issues will create 80% of your headaches. ➨ 20% of your customers lead to 80% of your profits. Master identifying the 20% that matters most. It's the secret to being more productive, without burning out. And you won't believe how much more you'll achieve. Where have you seen the 80/20 rule in action? Follow Long Term Mindset for more content like this. *** P.S. Want to master the basics of accounting (for free)? I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English. Check it out here (It's free) → https://lnkd.in/eKbRV7g6 If you found this post useful, please repost ♻️ to share with your audience

50 Terms Every Investor Should Know 401(k): An employer-sponsored account that provides workers with a tax-advantaged way to save for retirement. Acquisition: When a company buys the majority of another company’s stock in order to gain control of it. Appreciation: When the value of an asset increases over time. Asset Allocation: An investment strategy that aims to balance risk and reward by optimizing the portfolio’s mix of assets to best manage the investor’s needs. Balance Sheet: A statement of all the assets, liabilities, and equity that a company has at a point in time. Bear Market: When market prices fall by 20% or more. Bonds: Debt securities issued by corporations, governments, or other organizations and sold to investors. Bull Market: When market prices rise 20% or more. Capital Gains: When an asset is sold for a higher price than it was purchased. Cash Flow Statement: A financial statement detailing the cash movement through a company over a given time frame. Compounding: When the returns from an investment are reinvested to generate additional returns over and over again. Correction: When market prices fall 10% or more. Convertible Notes: A debt security that can be converted into a predefined amount of the issuer's shares. Debt: Money that is borrowed by one party from another. It needs to be repaid following predefined terms. Dilution: When a company creates new shares of stock, which has the effect of lowering the ownership percentage of the company’s existing stockholders. Diversification: A risk management investment strategy that mixes a variety of financial assets into a portfolio in order to minimize risk and maximize long-term returns. Dividend: A payment of a portion of a company’s profits to its shareholders. Dividend Yield: A financial ratio that estimates the cash return an investor can expect to earn from owning a stock or fund. Dollar-Cost Averaging: When an investor buys a fixed dollar amount of a financial asset at regular intervals, regardless of the price at the time of purchase. Dow Jones Industrial Average: One of the first stock market indexes that was created to help investors figure out whether the stock market is going up or down. Earnings per Share: The amount of profit shareholders have rights to per share owned. Exchange Traded Fund: A collection of financial assets that can be bought or sold on an exchange, just like a stock. *** ➕ Follow Long Term Mindset for more content like this. Want to master the basics of accounting (for free)? Enroll in our email-based course: Financial Statements School Get started here (It's free) → https://lnkd.in/eKbRV7g6 If this post was helpful, repost it ♻️ to share with your audience.

Operating Budget vs Capital Budget: What Every Business Owner Needs to Know? Total credit to: Gary Jain 🚀 🚀 As a business owner, you need to manage your finances effectively. In the world of accounting, two important tools for managing your finances are: ▶️ Operating budget and capital budget. But what do these tools of finance mean and how do they help you in business? Let’s understand it from basics: 📍 Meaning of Operating Budget: - Operating budget is a financial plan that outlines the expected revenue and expenses for a specific period, usually a fiscal year. - - It focuses on day-to-day operations and helps in managing cash flow. 📍 Meaning of Capital Budget: - Capital budget is a financial plan that outlines the expected investments in long-term assets, such as land, buildings, and equipment. - It focuses on long-term goals and helps in managing long-term debt. 📍 Why you need to know about these tools and how do they help you? 🔸 Significance of Operating Budget: → Making decisions related to day-to-day operations. → Help businesses to track, project, and adjust their expenses. → Identifying areas where cost-cutting measures can be implemented. → Setting short-term goals, monitoring the performance of the business. 🔸 Significance of Capital Budget: → Help in making decisions related to long-term investments → Identifying areas where capital expenditures can be made → Setting long-term goals, monitoring the progress of capital projects If you are a smart business owner, then make sure you avoid 3 severe mistakes mentioned below: 1️⃣ Mixing up expenses: Some expenses may be recorded differently for operating budget than for capital budget. Make sure you understand the difference. 2️⃣ Ignoring long-term goals: Capital budget helps in achieving long-term goals, such as expanding the business or upgrading equipment. Don't ignore the importance of long-term investments. 3️⃣ Not coordinating: Operating budget and capital budget are interconnected. Changes in one budget can affect the other. Follow Long Term Mindset for more content like this. *** P.S. Want to master the basics of accounting (for free)? I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English. Check it out here (It's free) → https://lnkd.in/eKbRV7g6 If you found this post useful, please repost ♻️ to share with your audience

Financial Statement Yellow Flags 🇳🇺 Watch for these warning signs when analyzing financial statements: 💰 INCOME STATEMENT → Sudden slowdown in revenue growth rate → Gross margin Declining → Extraordinary Charges: Large and frequently appear → Tax rate below Corporate rate (21% in U.S.) → Net profit lower than cash from operations → Sales & marketing expenses growing faster than revenue → Excessive dilution ⚖ BALANCE SHEET → Goodwill More than 50% of total assets → Receivables rising faster than sales → Inventory rising faster than profits → Debt exceeds cash → Cash less than total debt → Retained earnings are negative → Goodwill write-down 💰 CASH FLOW STATEMENT → Negative net income → Stock-based compensation more than 10% of net income → Operating cash flow less than net income → Free cash flow less than net income → Capital expenditures greater than 25% of net income → Excessive debt usage → Excessive stock issuance What Yellow Flags 🇳🇺 did I miss? Let me know below! *** ➕ Follow Long Term Mindset for more content like this. Want to master the basics of accounting (for free)? Enroll in our email-based course: Financial Statements School Get started here (It's free) → https://lnkd.in/eKbRV7g6 If this post was helpful, repost it ♻️ to share with your audience.

5 Easy Steps to Create a Presentation Like a Pro by Soufyan Hamid - Follow him! Don't❗Here's something that 𝘄𝗶𝗹𝗹 𝗵𝗲𝗹𝗽 𝘆𝗼𝘂 I know how 𝗮𝗻𝗻𝗼𝘆𝗶𝗻𝗴 it can be to work on PowerPoint when you were only trained to work with Excel But believe me, working with slides will help you - gather and structure your thoughts - build a designed storyline - focus on the important messages So instead of rejecting PowerPoint because it takes too much time, train your skills to 𝗱𝗲𝗰𝗿𝗲𝗮𝘀𝗲 𝘁𝗵𝗲 𝘁𝗶𝗺𝗲 spent on it And thanks to these 5 easy steps , you will learn how to - start before building your slides - visually enhance your work - save time with shortcuts - use external plugins (not always possible on your corporate laptop) Follow Long Term Mindset for more content like this. *** P.S. Want to master the basics of accounting (for free)? I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English. Check it out here (It's free) → https://lnkd.in/eKbRV7g6 If you found this post useful, please repost ♻️ to share with your audience

20 Types of Stocks - IPO Stocks - ESG Stocks - Safe Stocks - Value Stocks - Penny Stocks - Growth Stocks - Income Stocks - Secular Stocks - Cyclical Stocks - Dividend Stocks - Mid-Cap Stocks - Common Stocks - Preferred Stocks - Domestic Stocks - Blue Chip Stocks - Small-Cap Stocks - Large-Cap Stocks - Value Trap Stocks - International Stocks - Non-Dividend Stocks 11 major sectors of the stock market: - Energy - Utilities - Financial - Industrial - Materials - Healthcare - Real Estate - Technology - Consumer Staples - Consumer Discretionary - Communication Services Which types of stocks do you invest in? Let me know below! *** ➕ Follow Long Term Mindset for more content like this. Want to master the basics of accounting (for free)? Enroll in our email-based course: Financial Statements School Get started here (It's free) → https://lnkd.in/eKbRV7g6 If this post was helpful, repost it ♻️ to share with your audience.

CEO vs CFO vs COO Credit to: Nicolas Boucher follow him! What are the difference in their roles? Knowing what the management does is going to help you in your career. Let's discover together what they do: 1. Their Main Leadership Roles CEO leads the company CFO manages finances COO oversees the day-to-day operations. 2. On Strategic Vision CEO drives strategy, growth, and innovation CFO ensures stability and establishes discipline COO implements the strategic initiatives 3. What Are Their Stakeholder Relations? CEO represents the company to stakeholders and is the public face CFO reports financials to the board and shareholders COO liaises between different departments to ensure smooth execution 4. Their impact on Company's Values & Benchmarks CEO sets corporate values CFO sets financial benchmarks COO ensures operational processes align with these values 5. Their Role in the Market Strategy CEO drives global expansion CFO optimizes existing markets COO manages operational aspects of market penetration 6. What is their Client Focus? CEO focuses on client acquisition CFO focuses on client retention COO enhances service delivery to facilitate both 7. Their Involvement with Risk Management CEO sets the company's risk appetite, CFO manages risk, and COO mitigates operational risks. 8. Their Relation to the Brand CEO develops the brand CFO tracks the performance COO optimizes operational efficiency to uphold the brand promise 9. Their Role on Investments CEO determines investment strategy CFO manages investment portfolios COO allocates resources to meet strategic objectives. 10. Their Involvement in the Product Lifecycle CEO drives product development CFO monitors product profitability COO coordinates product manufacturing and delivery Follow Long Term Mindset for more content like this. *** P.S. Want to master the basics of accounting (for free)? I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English. Check it out here (It's free) → https://lnkd.in/eKbRV7g6 If you found this post useful, please repost ♻️ to share with your audience