Acc/290 Week 2 Individual Assignment

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

Financial statements provide financial decision makers with varied information presented in specific formats that is easily attainable tools to evaluate financial health. Three of the necessary financial statements are the statement of financial position or the balance sheet, operating statement also called income statement, and the statement of cash flows (Finkler, Jones, and Kovner, 2013).

The information found in financial statements outlines the financial activities of that company, and can help managers, creditors, and investors make many important decisions.

Financial statements are imperative for organizations to keep track of the overall performance and value of the company over a period of time. Furthermore, the financial statements are necessary for creditors and investors to evaluate a company’s financial performance. There are four primary financial statements which focus of different areas of the financial aspects. There are balance sheets, income statements, statements of retained earnings, and statement of cash flows. Each of these statements is an essential measure for the financial activities within a company.

The Balance Sheet give investors an idea what the company owns, and owes, as well as the amount invested by shareholders. The Balance Sheet also provides a glimpse of the company's assets, liabilities and shareholders' equity at a specific point in time. The Balance Sheet helps to give us the financial status of the company. (Investopedia 2016)

“The purpose of the balance sheet is to report the financial position (amount of assets, liabilities, and stockholders’ equity) of an accounting entity at a particular point in time” (Libby, Libby & Short, 2011). The information on the Balance Sheet will help managers, investors, and lenders to analyze the company’s financial capabilities. The report is only written at the end of the year and does not provide prior financial information. Therefore, the Balance Sheet should also include the other financial reports required to view the company as a whole. The Balance Sheet can also be a useful tool to analyze trends of accounts receivables and payables. The formula for the Balance Sheet is:

Accountants, business owners, investors, creditors and employees use four basic financial statements of an organization to determine the financial well-being and future earnings potential of that organization. Financial statements are a key tool in seeing and understanding the past, present and future condition of an organization. What are these financial statements and what do they mean to the reader? Do the financial statements mean something completely different to an investor, creditor, and employee?

Financial statements are used to track performance and explain differences in multiple companies (Melicher & Norton, 2013). The information available on these reports is important to have if you run a company, or are researching it for investment purposes. These statements can show where money could have been saved, or used in a different way. They are a useful tool for management to adjust their approach as needed. There are different industries, which results in a variety of assets, liabilities, products, services, and approaches to producing profit (Melicher & Norton). There are large and small companies and financial statements provide a way to research and, or compare them. The following will discuss financial statements, including income statements, balance sheets, and statement of cash flows.

There are four types of basic financial statements. They are the balance sheet, income statement, statement of equity, and statement of cash flows. Each of these are taken into account as a source for the company and used for different reasons. Creditors, investors, and management all have different reasons for having more interests in the certain statements they choose to look at closer.

While each of the four financial statements contains specific information tailored to differing aspects of a company’s performance, there are relationships between them which warrant mention. The balance sheet depicts assets which include cash, yet the statement of cash flows goes a step further in explaining the origin and actual use of the firm’s cash reserves. As mentioned, a company’s retained earnings make an appearance on the first line of the income statement as the retained earnings are a direct function and result of net income. Retained earnings are also considered an asset and consequently appear on the balance sheet as well. Evidently there are items contained within these statements that have a direct impact on each other.

The four basic financial statements including the balance sheet, income statement, statement of retained earnings, and cash flow statement together form the foundation of financial reporting for a business. The intent of this paper is to define the purpose of these four statements, how these statements are useful for internal managers and employees, and how they are useful for those external to a company incouding investors and creditors.

Financial statements are a means of outlining financial activities for a specified business or any other entity. That information is presented in a specified order and represents all activities for that business in a specified accounting period. There are several types of financial statements and these statements tell investors specific information about a company and how it operates. Income statement, balance sheet, owner’s equity section, and a statement of cash flow are very important.

The definition for a financial statement is a written report which quantitatively describes the financial health of a company. (www.investorwords.com)

Financial Statements are used to record and provide information on the financial activities of a business, person or entity, this information is used by a wide range of entities in order to make economic decisions (Reference). These reports quantify the financial strength, performance and liquidity of a company and are intended to be understandable to audiences who have an adequate knowledge of economics and accounting. To acquire a better knowledge of financial statements it is important to understand why they are put together in the first place. From a company’s financial statement various information is provided in order to allow investors and creditors to evaluate a company’s financial performance, with different financial statement

Financial statements provide a view on the company’s financial changes within a specific reporting period and confirm its overall state. They give information such that they provide shareholders with a picture of how well the company is doing. These enable them to evaluate a stock’s worth and aid them in making stock-related decisions such as buying/selling/retaining which provide them further on the status of their return on investment. Additionally, they reflect how the shareholders’ money are invested, its outcome and effect to the company.