Pink Sheets

Humans have spent at least a million years processing image information and only a few thousand years (at most) handling numbers. We're far better at interpreting pictures than numbers. It's easier and faster for me to see financial statements visually than in numeric format.



Starting with a balance sheet like this:

Assets

cash: $10 million
AR: $15 million
inventories: $12 million
Total Current Assets: $37 million

PP&E gross: $25 million
total accumulated depreciation: $15 million
Total Assets: $52 million

Liabilities and Equity:

accounts payable: $5 million
accrued expenses: $7 million
Total Current Liabilities: $12 million

long term debt: $8 million

equity: $32 million
Total Liabilities and Equity: $52 million

We end up with a chart that looks like this, where the length of each line represents the amount of each category. I just now changed my mind about handling contra-assets like depreciation by using "-" instead of "*" for the amount of offset.

Assets
cash                **********
AR                  ***************
inventories         ************
Current Assets      *************************************

PP&E (less deprec)  **********---------------

Total Assets        ****************************************************

Liabilities
AP                  *****
accrued expenses    *******
Total Current Liab  ************

long term debt      ********

equity              ********************************

I try to scale the lengths of lines to something reasonable. If there is net cash on the balance sheet (i.e. cash minus total liabilities is greater than zero), then I'll add a line for "Net Cash" above the "cash" line and make it bold to stand out.



Here I show the revenue as the first line with costs, expenses, net income as components of that line. There are always special cases so I try to best represent what's really there so I won't be misled when I come back an hour later and try to figure out what I was doing.

Revenue: $20 million
Cost of good sold: $10 million
Sales, General, and Admin Expenses: $5 million
Taxes: $2 million
Net income: $3 million

Revenue       ********************
COGS                    **********
SG&A               *****
Tax              **
Net income    ***

I'll usually add key ratios (whatever makes sense for that particular type of business) here as well.



For operating cash flow, I show net income as the first line. Then each entry is shown as increasing ("+") or decreasing ("-") the line. Wherever the cursor ends up on the last entry is cash flow from operations.

Investing usually uses cash, I often use just minus signs ("-") and treat it as the inverse of cash generated. Sometimes I improvise. I haven't settled on a solid set of rules for doing this.

net income: $3 million
depreciation: $1 million
increase in AR: ($2 million)
cash flow from operations: $2 million

capital expenditures: ($3 million)
acquisition of business: ($10 million)
cash flow used in investing: ($11 million)

payment of revolving line of credit: ($2 million)
stock issued: $5 million
cash flow from finance: $3 million

Operations
net income        ***
depreciation         *
increase in AR      --

Investing
capex             ---
acquisition          ----------

Finance
stock issued      *****
revolver paydown     --

At the end, I usually figure out what I consider to be free cash flow (which is often cash flow from ops minus capex, but there's no substitute for thinking about how much true free cash they generated and what investment/finance is needed for sustaining the same level of business). I'll add a line for free cash flow, typically above the "net income" line and make it bold so it stands out.