Importance Of Financial Statements Essay

781 words - 4 pages

Frederick Cole Burgess
ACC 220
Joe Chandler

Importance of Financial Statements

Financial statements are important reports. They show how a business is doing and are very useful internally for a company's stockholders and to its board of directors, its managers and some employees, including labor unions. Externally, they are important to prospective investors, to government agencies responsible for taxing and regulating, to lenders such as banks and credit rating agencies, and to investment analysts and stockbrokers. They are especially useful to managers, investors and creditors.
Firstly, managers of   businesses, more than any of the other users, benefit most from the use of ...view middle of the document...

More specifically, investors and creditors need to know where their money went and where it is now. The financial statement of balance sheet addresses such issues by providing detailed information about a company’s asset investments. The balance sheet also lists a company’s outstanding debt and equity components, and so debt and equity investors can better understand their relative positions in a company’s capital mix.
Financial conditions shown in the balance sheet are snapshots of a company’s assets, liabilities and equity at the end of a financial reporting period; they don’t reveal what happened during the period from operations that may have caused changes to financial conditions. Therefore, operating results during the period also concerns investors. The financial statement of income statement reports operating results such as sales, expenses and profits or losses. Using the income statement, investors can both evaluate a company’s past income performance and assess the uncertainty of future cash flows.
A company’s profits reported in the income statement are accounting income and most likely contain certain non-cash elements, providing no direct information on a company’s cash exchange during the period. Moreover, a company also incurs cash inflows and outflows during a period from other non-operating activities, namely investing and financing. To investors, cash from all sources, not just accounting...

Other Essays Like Importance of Financial Statements

Comparison Of Financial Statements For The Sony Corporation And The Google Corporation

1038 words - 5 pages Prof. William C. AudenACC 403Principles of AccountingSubmitted by: Jason K. HauckMODULE 1 CASEIn the following pages I will be discussing several topics to include: the importance of the GAAP (Generally Accepted Accounting Principles), as well as comparing current assets and liabilities to non-current items. I will also review the financial statements for the Sony Corporation and the Google Corporation, locating the balance sheets, income

Need for Financial Statements Analysis

663 words - 3 pages Wake up call to prepare and make use of Financial Statements Analysis: By CPA, Simion Kirui, Member Institute of Certified Public accountants -Kenya Key topic questions: 1. Should Companies issue financial statement discussion and analysis when it issues financial statements? 2. Is there adequate use for Financial Statement Analysis? 3. Will one claim to have understood financial Statements in absence of Financial Statement Analysis? 4

Generally Accepted Accounting Principles

572 words - 3 pages Identify the GAAP used to create the financial plan. Explain the importance of each GAAP to the financial plan Generally accepted accounting principles (GAAP)—A set of rules used as a basis for financial reporting. Some key GAAP: a. Going concern—Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be

Accounting Standards Boards Paper

1150 words - 5 pages environment over the last decade has brought about the importance of transnational financial reporting. Users of this information must be able to understand not only the accounting principles used by the company, but the language of the country where they reside, and the currency used in preparation of the financial statements. “If investors and creditors cannot obtain understandable financial information about companies that operate in foreign

Literature Review

1375 words - 6 pages From my first accounting class to the last accounting class, one thing I learned how important financial statements are in accounting. All the accounting professors put so important on financial statements because one of their objective is to make sure students are well familiar with financial statement before graduating. Financial Accounting is the procedure of delivering data to the outsiders in a special report call financial statement

Financial Statements Paper

665 words - 3 pages Financial Statements Paper Accounting information consists several areas of interest for users looking to interact with a business. These areas include assets, liabilities, expenses and revenues. The information reflecting these areas of interest is used to populate financial statements. The backbone of financial accounting is made up of four basic financial statements. These four financial statements are a balance sheet, an income

Bus520 Chapter 15 & 16

1084 words - 5 pages Chapter 15: Understanding Accounting and Financial Statements Introduction The purpose of this chapter is to identify some of the concepts of Understanding Accounting and Financial Statements in the business world. Learning objectives 1. Explain the functions of accounting, and identify the three basic activities involving accounting. 2. Describe he roles played by public, management, government, and not-for-profit accountants. 3

Financial Statement

861 words - 4 pages RUNNING HEAD: FINANCIAL STATEMENTS PAPER Financial Statements Paper ACC 290 Financial Statements Paper In this paper the four basic financial statements will be defined. Each of the four financial statements has its purpose for use. As part of the paper the description of the purpose of the four basic financial statements is acquired. The discussion of the financial statements would be useful to internal and external users is

Reporting Practices and Ethics

945 words - 4 pages principles (GAAP). They are the accounting rules used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements and cash flow statements. GAAP is not written in law but the U.S. Securities and Exchange Commission (SEC) requires public companies and other regulated companies to follow GAAP for financial reporting. GAAP allows the timing and basis of items entered in the accounting cycle and impact the

Acc 561 Week 1 Paper

1144 words - 5 pages 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 learning’s to make a sound investment, or not. Which Financial Statement(s) Would Be Of Most Interest To Creditors? As a creditor or lender it is of utmost importance that they have all the information necessary to make a sound decision as to whether or not they will

Ethics Paper

881 words - 4 pages ) are principles, standards, and procedures that organizations agreed upon when reporting financial statements. These principles must be devoted to, such as those put in play by certain financial boards, and others are just standards that have been ordinary in these statements. Organizations that use Generally Accepted Accounting Principle (GAAP) when making these reports will have a more consistent way of displaying data. This makes the information

Related Papers

Application Of Financial Statements Essay

993 words - 4 pages investors, creditors, and other external users.1 Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life. Businesses record their performance in standard formats called financial statements. The most common is the Balance Sheet, the Income Statement, and the Cash Flow Statement. The balance sheet contains information at a moment in time about resources (assets) that are owned or

Purposes Of Financial Statements Essay

2157 words - 9 pages two main purposes of financial statements: 1. To report on the financial position of an entity 2. To show how the entity has performed over a particularly period of time. The most common measurement of performance is profit. It is important to understand that financial statements can be historical or relate to the future. The purpose of financial accounting statements is mainly to show the financial position of a business at a particular

Examination Of Prospective Financial Information And Review Of Financial Statements

2245 words - 9 pages Examination of Prospective Financial Information Definition “Prospective financial information” means information about future financial performance, future financial position, future cash flows, and future movements in equity based on assumptions about future events and courses of action. Prospective financial information includes prospective financial statements, the notes to the prospective financial statements, and any narrative relating

Analysis Of Best Buy’s Financial Statements Of Year Ending February 2014

1861 words - 8 pages MEMORANDUM To: James Harding From: Subject: Analysis of Best Buy’s financial statements of year ending February 2014 Date: 04/12/2015 Introduction: This memorandum is a clear and detailed analysis of Best Buy’s financial statements of year ending February 2014. I have analyzed the statements in the following perspectives: revenues and expenses, assets and liabilities, financial flexibilities, ownership structure, estimations and