Liabilities current and non current current

 Liabilities (Current and Non – current)
Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year
after year end date. Examples include Notes Payable, Accounts Payable, Accrued
Expenses (example: Utilities Payable), Unearned Income, etc.
Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue) within
one year after year-end date. Examples include Loans Payable, Mortgage Payable, etc.
Noncurrent assets and noncurrent liabilities are also called long term assets and long term
liabilities.
 Owner’s Equity or Capital
Capital is an item of balance sheet wherein the capital or interest of the owner of the
business is listed. Initial withdrawal of capital will be recorded in a drawing account of the
owner and will be reflected as a deduction to the capital balance.
CONCEPCION ADVENTIST ACADEMY @ 2021 12

INTERPRETATION OF FINANCIAL STATEMENTS
Financial statements will reveal the outcome of the business operations. A financial
analyst is like a medical doctor who will conduct diagnosis by reading the financial report and
render interpretations on it which will be used as the basis of a sound economic decision
making. As previously defined, balance sheet reflects the financial position and condition of the
business. The financial position refers to the assets of the business which will be financed by
the liability and owner’s equity. On the other hand, financial condition refers to the situation
wherein assets, liability and owner’s equity are used to maximize income. Also, assets, liability
and owner’s equity may encounter growth or decline in value. There are many available
financing tools to be used in analyzing and interpreting financial statements. It depends on the
purpose. Most of these tools are able to evaluate and interpret asset growth of the business,
profitability, liquidity and solvency. In general, it will provide a bird’s eye view of the overall
health of the business. Depicted in figure 14 below is a matrix of financial interpretation with
formula and explanation.
Accounts Formula Interpretation
Profitability ratios Measure the ability of the company to generate income from the
use of its assets and invested capital as well as control its cost.
Operating Income
Ratio
Operating Income
Net Sales
It measures the percentage of
profit earned from each peso.
Return on Asset (ROA)
Net Income
Average Assets
Measures the peso value of
income generated by employing
the company’s assets.
Return on Equity
(ROE)
Net Income
Average Equity
Measures the return (net income)
generated by the owner’s capital
invested in the business
Financial Health Ratios Refers to the company’s capacity to pay their short and long
term obligations as they become due.
Debt Ratio
Total Debt
Total Assets
Indicates the percentage of the
company’s assets that are
financed by debt. A high debt to
asset ratio implies a high level of
debt.