Financial Statements Are Used For Track Performance And Explain Differences

(Ohara, 2007) Most financial statements are made public for the benefit of stakeholders and potential investors. The bottom-line is that financial statements are the main source for analyzing how well a company is operating. The income (or profit and loss) statement is simply a report card of how much activity (revenue) was performed in the period, how profitable that activity was (gross profit/loss), and what it cost the contractor to run the business (overhead). (Murphy, 2006)

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

Understanding the finances of a company is important but knowing the significance of the financial statements is crucial to the operations as well. Reviewing the statement of financial position, operating statement and statement of cash flows serve as a guidance to management and executives on the day-to-day activities of an organization (Finkler et al., 2013). For example, the statement of financial position (balance sheet) shows the assets and

Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;

The income statement is a financial statement that measures all of a company’s revenues, gains, expenses, and losses incurred to essentially generate a net income. Drawing from all forms of revenue and expenses including, the income statement represents the most accurate projected profitability of a company.

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

Financial statements are a very useful tool for individuals interested in the organization. Investors use the information to determine if it a wise decision to put their money into the organization. Investors need to determine if the organization has been successful and profitable and will continue to be successful and profitable. Creditors use the financial statements to determine the amount of credit that should be advanced to the organization. Employees generally do not look at the financial statements, but if a new executive was thinking of joining the organization, he or she may want to see the potential of the organization to make sure the investors are becoming a part of a successful organization. Management uses the financial statements on a monthly basis to determine which areas of the organization are profitable and which areas of the organization that needs to be discontinued or restructure to become more profitable.

Financial statements are a vital factor of any business organization; they show where a company’s money came from, where it went, and where it is now, according to Securities and Exchange Commission website (2008). In addition, four main financial statements consist of the balance sheet, income statement, cash flow statement, and statement

Financial statements are very important for decision makers in the business world. They inform the firm’s owners, lenders and managers of the performance of the company and their employees. Standardized financial statements make for financial transparency between all businesses and sectors of business. Financial statements are important to companies not only to measure performance but to obtain capital through debt and equity. The main financial statements used by all companies, private and public, are the balance sheet, income statement (profit and loss statement), and statement of cash flows. Companies also use financial ratios to determine if they are performing to standards and are determine if they are increasing revenues sufficiently with the amount of expenses and debt taken on.

This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement

The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ

The financial statements that a company produces can be used to help evaluate the financial condition of the company. The main statements are the income statement, the balance sheet and the statement of cash flows (Harper, 2012). The company's performance can be evaluated in a number of different ways. The most important are that the company can be evaluated against its own past performance, and it can also be evaluated against other firms in the same industry.

The income statement is one of the major financial statements used by accountants and business owners. The income statement is sometimes called profit and loss statement, statement of operations or statement of income. It is important because it shows the profitability of a company during the time interval specified on the heading. The income statement shows revenues, expenses, gains, and losses; it does not show cash receipts nor cash disbursements. People pay attention to the profitability of a company for many reasons, and the income statement helps in doing this in that it helps current lenders and investors, company management, competitors, government agencies, labor union, and others. The expense items located on the income statement appear under five major categories

The income statement is an important tool for tracking cash flow in and out of an organization. The income statement tracks revenue and expenses over a period of time, or accounting period (Melicher & Norton, 2014, p.

The overall purpose of financial statements is the provision of relevant and concise information about the financial position of a firm or other business enterprise. Financial statements allow a manager or analyst to make informed judgments regarding the proven and likely future performance of a firm prior to the making of important investment decisions (Bernstein and Wild, 2000).