Financial Statements Are Indispensable Analytical Tools For Any Business Regardless Of Size

811 Words Dec 13th, 2016 4 Pages
Financial statements are indispensable analytical tools for any business regardless of size. There are four primary statements (balance sheet, cash flow statement, retained earnings, and income statement) that are reviewed and analyzed on a regular basis that display an organization economic wealth and health.
• Balance Sheet – will permit the viewer to determine the net worth of an organization via seeing: o Total assets, debt, and owner/stockholder’s equity
• Income Statement – one will ascertain the both current and past performance of a company via displaying: o Gross income o Adjusted gross income (gross income – cost of goods sold) o Operating income (direct and indirect) o Income before and after taxes
• Cash Flow Statement – is an important part of the life line of the company. This statement will exhibit the daily cash received and spent.
• Retained Earnings – Depicts the net income distributed to owner(s)/shareholders after taxes and withdrawals.
Furthermore, these statements afford the viewer to make intelligent decisions regarding future monetary objective(s), evaluating, feedback, and provide a path for forecasting, performance, control, along with planning (Garrison, Noreen, & Brewer, 2014).
Understanding the purpose, components, and how each statement stand alone and interrelate afford viewers both internal and external a clearer insight regarding any business in its entirety. When a viewer is reviewing an income statement he or she (gross and net…

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