Financial Statement Essay

Published: 2020-02-17 17:52:34
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Category: Financial statements

Type of paper: Essay

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The first issue to discuss is the four different types of financial statements and the use of each that a business will use. The second issue to discuss is what financial statements that an investor will review. The third issue to discuss is what financial statements a creditor will review. The fourth will be what financial statements that management within a company will review.

The first financial statement is the income statement (Kimmel et al, 2009). The income states will show the success or the failure of a companys operations for a certain period. The income statement will have the revenue the company will make, the expenses the company will spend, and the net income of the difference of each.

The second financial statement is the retained earnings statement (Kimmel et al, 2009). Retained earnings mean the net income that is retained in the corporation. The statement will show the amount and the cause of changes that can occur in the retained earnings during a certain period. The period of both the retained earnings and the income statement have the same period. The information covered on the retained earnings would be the earnings from the month prior, add the net income, minus the dividends, and the outcome for the retained earnings for a certain month.

The next financial statement would be the balance sheet (Kimmel et al, 2009). The use of the balance sheet is so a company can report the assets and the claims to the assets during a certain period. The claims to assets can be from two groups, the first would be the claims to creditors that would be the liabilities and the second would be the claims to owners that would be the stockholders equity. The basic accounting equation is Assets = Liabilities + Stockholders Equity. Both sides of this equation must balance out.

The last financial statement will be the statement of cash flows (Kimmel et al, 2009). The statement of cash flows will provide financial information about the cash receipts and payments of business for a certain period. The statement of cash flows will report the cash effects of the companys expenses. Those expenses can be through the operating, investing, and financing activities. The statement of cash flows will also show the net increase or decrease in cash during a certain period. The statement will also show the amount of cash at the end of another period. The information found on the statement of cash flows will be the operating expenses, the investing expenses, the financing expenses, the net increase, the cash at the beginning and end of a period.

Investors will view the income statement to see the future performance of a company (Kimmel et at, 2009). Creditors will view the income statement for loans. Creditors will also view the retained earnings statement and the balance sheet to see the ability for a company to repay debt.

Management will view each financial statement to see the financial health of the company (Kimmel et al, 2009). Management can view the income statement to see if the company is a success or failure. The retained earnings statement to see how much income will return to the company. The balance sheet to see how much cash is on hand for certain needs and to ensure there is a satisfactory proportion of debt to common stock. The statement of cash flows to see the entire picture of what is going on within the company financially.

In conclusion, the highlight of the four different types of financial statements and the use of each that a business will use. The highlight of the financial statements an investor will review for the company. The highlight of the financial statements a creditor will review for the company. The highlight of which financial statements the management of the company will review for the organization.

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