American Military University
05 September 2014
This assignment looks at the different statements that a company would want to ensure is managed carefully and efficiently to give it a clear idea of where it stands financially. These look at how much debt it is incurring, the amount of cash that is brought into the company, and also the amount of cash that is spent. The topics discussed are the purpose of income statements, balance sheets, owners’ equity, and cash flows. These are all very important tools in a company’s portfolio and every company should be paying close attention to these statements as it gives them an idea of where they ...view middle of the document...
It is usually examined by the end of the month or even after a year. The balance sheet will show the company’s holdings and how much in debt it is. It’s a concise listing of the company’s assets, liabilities and equity of shareholders. This sheet is of particular interest to investors as it lists exactly where the company stands. On the balance sheet, the company’s assets are subtracted from its liabilities, and that leaves the stockholder’s equity (Reeves, 2014). This equity represents how much money the stockholders will have. “The assets are anything that have real value like money in your bank account, equipment used to operate the company and housing, as in real estate”. The liabilities are what you owe, such as a loan from a bank or a mortgage from your mortgage lender and any debts owed to contractors, brokers, consumers, etc. The difference between those assets and the liabilities leave you with equity (Myers, 2014). That equity can be used to settle debts received from investors.
Owner’s equity can be found in any business. When a shareholder invests in a company, that investment is regarded as owner’s equity. The shareholder now has a vested interest in the company, and usually will put up cash to help the business move forward. Three different accounts that encompass the owners’ equity section on a typical corporate balance sheet are the common stock accounts, the par value, and the retained earnings account.
In a common stock account, a company re-buys stock it previously held from its stockholders. The owner will lay claim to it. The par value is subjective and should not be associated with the market value at the time, nor the company’s stock price (Norton, 2014). The retained earnings have been capitalized into the company’s assets, but it is not in the form of cash. Retained earnings will look at net income from the time the company started until the date of the balance sheet (Averkamp, 2014).
Cash Flow Statement