I have selected Apple as the company that I will be following financially for the duration of Accounting 561. Not only am I a passionate Apple user, I also believe in how the company develops, creates, and markets their product lines for consumer use. They have created products that are so complex at their core with an extremely simple user experience, which has been nothing short of remarkable to watch from the time I was a child through adulthood. I look forward to studying the company and their financials further as we dive deeper into Accounting 561.
There are four major financial statements that investors, creditors, accountants, CEOâ€™s, ...view middle of the document...
If a company has a net loss, it deducts (rather than adds) that amount in the retained earnings statementâ€ (Kimmel, Weygandt, & Kieso, 2009).
â€œThe balance sheet reports assets and claims to assets at a specific point in time. Claims to assets are subdivided into two categories: claims of creditors and claims of ownersâ€ (Kimmel, Weygandt, & Kieso, 2009). It is important to understand how to calculate a balance sheet, the formula is simple yet it shows the â€œbalancedâ€ relationship between assets and claims to assets. The formula is as follows: (Assets = Liabilities + Stockholdersâ€™ Equity).
â€œThe primary purpose of a statement of cash flows is to provide financial information about the cash receipts and cash payments of a business for a specific period of timeâ€ (Kimmel, Weygandt, & Kieso, 2009). The statement of cash flows reports on the effects of a companyâ€™s financial activities (operations, financing, and investing), which then provides investors, creditors, and management a view into the cash flow of the company. â€œIn addition, the statement shows the net increase or decrease in cash during the period, and the amount of cash at the end of the periodâ€ (Kimmel, Weygandt, & Kieso, 2009).
Which Financial Statement(s) Would Be Of Most Interest To Investors?
Investors have a responsibility not only to themselves but also to their clients to be as knowledgeable as possible on the financial health of the company that they are planning on investing with. The use of financial statements is the most concise way to evaluate a companyâ€™s financial health. Investors are likely to use income statements, statement of cash flows, and retained earnings statements to decide if a company is a sound investment or not. Before making a decision on whether to invest it is important to know where, when, and how a company is earning their income (clearly depicted on an income statement), where the cash that the company has is going or how it is being spent (clearly depicted on a statement of cash flow), and finally at what frequency and amount the company is paying their investors dividends (clearly depicted on retained earnings statements). The use of these three financial statements should be more than enough for an investor to gain the necessary learningâ€™s to make a sound investment, or not.
Which Financial Statement(s) Would Be Of Most Interest To Creditors?
As a creditor or...