The Components Of Financial Management Essay
Managers within the firm, as well as the firm’s owners and lenders, keep track of the firm’s performance by reviewing its financial statements - income statement, balance sheet, and statement of cash flows.
Every business firm, small or big, from a sole proprietor to Partnership to the business organization, all of it keeps the record of its financial transaction. It is known as financial statement. Financial statement is the mirror of the financial situation of a company. Financial statement includes various types of financial transaction depending on the operation of cash.
Income Statement - It is the financial statement that shows the change that has occurred in firm’s position as a result of its operations over specific period. It reports revenue generated and the expenses incurred by the firm over an accounting period. It is also referred as Profit and loss statement that reports success or failure of business during the period. Success means greater revenue and failure meaning less revenue than expenses. It mostly covers period of one year but can also be done monthly, quarterly or semi-annually. There are different types of income and expenses reported in income statement.
a. Revenues: it is the gross sales business made during particular period. It consists of the money actually received from sales but this is not always the same.
Components of Financial Management
b. Expenses: These are the costs related with…