Financial Statements Essay

1092 words - 5 pages

Financial Statements
ACC/497
January 30, 2013

Decisions are made daily by company management, lenders, and shareholders. To make informed, intelligent business decisions, there are several strategies that are used by each of the fore mentioned entities. When deciding if investing is the right choice, if a company will be able to repay a loan, or what needs to happen to make a company more efficient, the best way to get an inside look at the company and the information needed, would be to look at the financial statements. By looking at the income statement, balance sheet, and the statement of cash flow, the financial health of the company can be discovered.
A shareholder or potential ...view middle of the document...

An investor would be looking for the company to be making decent profits. Shareholders will also be looking for profits as well, but if the company is not making a profit, the shareholders can suggest to management to reevaluate business strategies or find ways to cut expenses. The profitability of a company is what investors, potential and current, are looking for. When the income statement doesn’t reflect a large enough profit or shows a net loss, it also affects the decisions of lenders. They may decide that the risk of the company not being able to repay a loan is too great and decline to extend credit.
Another useful statement is the balance sheet. According to Investopedia, the balance sheet is “a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time.” (Investopedia, 2013) The information provided on the balance gives investors and shareholders a picture of what the company owns and what the company owes. Included on the balance sheet are accounts such as inventory, cash, and property. The balance sheet provides a dollar amount of assets that a company has on a previous date. Assets are things that company has possession of such as cash, land, and inventory. Hence the name balance, the credits and debits should balance. The balance sheet also reports the liabilities that the company has. Liabilities would include all monies owed out by the company such as accounts payable and loans payable. The balance sheet would be looked at by management to assess the overall financial health of the company, as well as investors for the same reason. Lenders would also look at the balance sheet to determine any risk with extending credit. The balance sheet requires that each part of it must balance. In order for that to work, the company’s assets should equal their liabilities plus the shareholders’ equity. The balance sheet is basically a way for investors to get a picture of a company and its operations. The balance sheet shows a snapshot the company's accounts which include its assets, liabilities and its shareholders' equity at a certain point in time. The balance sheet gives its readers an idea of the company's financial position. It displays what the company owns and what it owes. Investors will find this statement extremely useful.
The...

Other assignments on Financial Statements

Financial Statements Paper

789 words - 4 pages Financial Statements Paper The 4 fundamental monetary reports are the balance sheet, income Statement, retained earnings statement, as well as statement of cash flow (Kimmel, Weygandt, Kieso, 2011). The balance sheet is used to show an idea of what a business has (Kimmel, Weygandt, Kieso, 2011). The balance sheet reports the quantity of assets and claims to assets for a time period (Kimmel, Weygandt, Kieso, 2011). Assets are products the

Accounting Processes' And Financial Statements Essay

1362 words - 6 pages Accounting Processes’ and Financial Statements The purpose of this paper is to provide a foundation of knowledge for accounting and financial bookkeeping. To accomplish this, I will focus on two areas. First, I will provide some general definitions for common accounting processes and ideas; namely, generally accepted accounting principles, double entry accounting, historical cost

Case Study For Dell Inc In Appendix A

266 words - 2 pages Answer the following questions using the annual report of Dell, Inc. in Appendix A. a. Who is responsible for the preparation and integrity of Dell’s financial statements and notes? Management has the primary responsibility for the preparation and integrity of Dell’s financial statements and notes. b. In which note does Dell report its significant accounting policies used to prepare financial statements? Note 1 is where Dell report its

Hello Tomato

1296 words - 6 pages information and results of operations for the past fiscal year. The annual report includes financial statements, notes to financial statements, management's discussion and analysis of financial condition, and the auditor's report. * Financial Statements: Financial statements include four interrelated documents that present financial information about a company. They include the income statement, statement of equity (sole proprietorship &amp

Accounting

384 words - 2 pages Media Summary Paper Irene Chumo ACC/300- Principles of Accounting January 26, 2015 September Foster Media Summary Paper The media that i used was the video on financial statements, “financial statements are records that outline the financial activities of a business, an individual or any other entity. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for

Financial Statement Paper

824 words - 4 pages Financial Statements paper . ACC/290 September 22, 2011 Financial Statements paper Accounting is an action needed by companies in business. Without accounting and the knowledge of the inner workings of financial statements, a business is doomed to failure. In accounting there are four basic financial statements used for an array of reasons. The first financial statement in accounting is the balance sheet. The balance sheet is used to

Homework

280 words - 2 pages to complete the overall job. Primarily the manager is responsible for raising the funds and making the right investment calls, so it’s important the knows everything there is to know about governing a business as far as the risks and the distribution of the funds. Maximizing the shareholders is key as well. Distinguish among the types of financial information contained in the various financial statements. Which statements. Which provide

Accounting Week1

692 words - 3 pages The Importance of Financial Statements Accounting is one key function in organizations today. It is also becoming a top career students are studying. According to Weygand (2008) accounting consists of three key points –it identifies, records, and communicates the economic events of the organization. (p. 4). To grasp the concept of accounting this paper entails the purpose of accounting. The four basic financial statements are identified. The

Apollo Case

526 words - 3 pages This will confirm our understanding of the arrangements for our audit of the financial statements of Apollo Shoes, for the year ending December 31,2011. We will audit the Company's balance sheet as of December 31,2011 and the related statements of income, retained earnings, and especially cash flows for the year then ended, for the purpose of expressing an opinion on them. The financial statements are the responsibility of the Company

Lee College

483 words - 2 pages Lee College Financial Statements ACC 380: Accounting for Not-For-Profit Organizations June 4, 2012 Lee College Financial Statements Why do Not-For-Profit organizations need financial statements? The accounting system for nonprofits is designed to capture the economic activities of the firm and its financial position. The financial statements are constructed based on the “Accounting Equation” in which: Assets = Liabilities + Net Assets

Puppy

353 words - 2 pages STUDY GUIDE EXAM 1: (25 multiple choice questions worth 3 points each and 3 problems worth 45 points) 3 problems may cover following topics: journal entries, adjusting journal entries, closing entries, preparation of financial statements, multiple step income statement. Chapter 1: Purpose (objective) of financial accounting; cash vs accrual accounting (net operating cash flow vs. net income); history of standard setting – SEC, AICPA

Similar Documents

Financial Statements Essay

547 words - 3 pages Done by: Shannan T. Week 1 Assignment: Financial Statements Numbers play a major role in business and to keep track of all of those numbers, financial statements are used. Financial statements are a way of communicating those numbers within the business organization. Financial statements are used as a foundation for decisions that will impact information systems, production, management, and marketing. Any income that a company is

Financial Statements Essay

326 words - 2 pages Katrina Baron Financial Statements The four basic financial statements are the balance sheet, income statement, statement of cash flow, and the statement of retained earnings. The balance sheet depicts the current financial circumstances of the company. This reports the company’s assets, liabilities, and net equity as of a given point in time. The income statement reports the company’s cost and revenues. This reports the company’s income

Financial Statements Essay

1502 words - 7 pages Accounting and Financial Statements Vern Rennier Upper Iowa University Accounting and Financial Statements In this essay I am going to explain and identify external users of accounting information and give detail on the main characteristics and how these characteristics and the conceptual framework develop the benefits of financial statements for external users. Financial accounting includes information distributed to external users

Financial Statements Essay 1525 Words

1525 words - 7 pages Financial Statements Leslie Johnson January 31, 2010 ACC/280 Principles of Accounting Accounting is a systematic proocess that identifies, records, and communicates the economic events of an organization to interested users (Weygandt, 2008). The financial information gathered is used to determine a company’s financial status and provide reports and insights needed to make sound financial decisions. The purpose of