Through the years the business world has use accounting and financial statements as a mean for communicating the numbers. Basically as a business person you need to know how to read financial statements in order to understand your business.
There are four basic financial statements that are normally prepared by profit-making organizations to be used by financial corporations, banks, stockholders and other external decision makers.
The first statement that we will discuss is the income statement. The Income statement is a financial report that shows the profits and costs and the resulting net revenue or net loss of a company for an explicit period of time. It basically displays how ...view middle of the document...
The liabilities are money that a company has a loan from others. Liabilities can include obligations such as money borrowed from a bank, rents, materials, payroll and taxes owed to the government. Liabilities also include commitments to provide goods or services to consumers in the future.
The Shareholders’ equity is occasionally named capital or net worth. It is mainly the money that would be left if a company sells all of its assets and paid off all of its liabilities. The remaining money will go to the shareholders, or the proprietors of the company.
The next statement is the Retained earnings statement. This is a financial statement that summarizes the amounts and bases for changes in retained earnings for a particular time frame which is basically the same that is covered by the income statement. The first line of the statement is the retained earnings at the beginning of the time period. Then and there the business adds net income and subtracts the shares to obtain the retained earnings at the end of the period. If a firm presents a clear loss, it subtracts that amount in the retained earnings statement.
The last Statement that will be discussed here is the Cash flows statement. This is financial statement that makes available financial information about the cash receipts and cash payments of a business for a specific period of time. It shows the exchange of money between a company and the outside world also over a period of time. The main purpose of a statement of cash flows is to make available information about the cash within a business for a specific period of time. This statement helps in the analysis of a company's cash position because it reports the cash effects of an enterprise's financial activities. Furthermore it make available the net cash growth or reduction during a specific period of time.
* All financial statements are useful to internal users of the companies, such as managers and employees. The internal users that utilize the accounting information are people that are involve in the planning, organization and run a business based...