Financial statements

Essay by mystery1013University, Bachelor'sA-, January 2013

download word file, 8 pages 0.0

Executive Summary:

The purpose of each financial statement is to assist the user in making decisions for the organization based on the latest financial information. The owners of a company and executives can ascertain if the company is effectively working toward its revenue goals during the reporting period by reviewing the retained earnings statement. Managers can quickly determine profitability of the organization by utilizing the income statement or using the balance sheet to see where the majority of the assets are allocated. A shareholder or customer can check on how efficiently a company is managing its cash by reviewing the statement of cash flows. The usefulness of the different statements is not limited to any specific group; this is best determined by who needs the information and the type of information needed.

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Table of Contents

1. Introduction ...................................................................................................................3

2. Background of company ...............................................................................................3

3. Operating activities........................................................................................................4

3.1 Difference between accrual and cash flow effects of operating activities...................4

4. Earnings per share............................................................................................................5

5. Sources of Cash................................................................................................................6

6. Financial Activities..........................................................................................................7

7. Investing Activities...……………………………………………………………………7

8. Cash flow statement considerations.................................................................................7

9. Reported Assets…………………………………………………………………………8

10. Conclusion.....................................................................................................................8

References…………………………………………………………………………………9

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1. Introduction

Financial statements are important reports. They are used to analyze a company's past, present and future performance (Johnson, 2004). Each of these statements uses specific information that has been "identified, measured, recorded, and retained" during the accounting process (Bazley M & Hancock P, 2010). Our text book, identifies the four basic financial statements as: a balance sheet (also known as a statement of financial position), which portrays the financial position of the company by listing all of the assets and liabilities of the business at the end of the period, the difference between the two being the company's net worth; an income statement, on the other hand, shows whether a company's operations have...