Blah Essay

871 Words Oct 8th, 2012 4 Pages
The Four Types of Financial Statements
Aaron Ellyson
University of Phoenix

The Four Types of Financial Statements
In today’s business environment an employee’s ability to read, follow, and interpret financial statements is an integral part in ensuring a business is properly positioned to succeed and operate profitably. Understanding what the numbers represent, how business decisions influence those numbers, and what categories comprise the data shown on these statements will enable employees to help drive their companies with cost conscience motives and personal responsibility for their actions. The four basic financial statements are as follows: income statements, retained earnings statements, balance sheets, and statements of cash
…show more content…
A business’s financial statements are an important tool for the company’s employees and must be understood properly to steer a business away from excess expenses. Analyzing the data provided in the income statement would help internal users such as marketing managers determine if a company’s product is directed at the right audience or if the pricing is set correctly to maximize the profit margins. A department director will be better equipped to make decisions on further investing earnings back into research and development of a new product line if the retained earnings statement shows additional cash is left over after paying dividends to its stockholders. The company executives can determine if the company is headed in the right direction after analyzing the assets to liabilities ratios. If the business is not overspending on inventory, overhead expenses, and payroll while continuing to meet obligations according to the vendor’s net terms; a business will be better positioned to succeed. Finally, a procurement manager’s understanding of the cash flow statement will allow for the allocation of emergency cash funds to purchase inventory when the increase in demand of a new product begins, the company has the cash on hand available.
External entities must utilize a business’s financial statements to determine

Related Documents