Introduction
Many decisions about the operations in business are made based on the financial statements of the business. The financial statements of the business provide the manager with a working picture of the financial health, profitability and performance of the business. It provides investors a snapshot and long-term picture of the business and guides many investment decisions in the business as well as helps to track performance by reviewing its financial statements including income statements, balance sheets, and statement of cash flows.
The Purpose of the Income Statement The purpose of the income statement is simply to show the profit or loss of a business operation over a specified accounting period such as quarterly or annually …show more content…
Owner’s or shareholder’s equity is the funds supplied by the shareholder or owners (Melicher & Norton, 2013); it can be in the form of cash outlays or owner purchased assets or in the case of corporations it will be in the form three types of accounts, preferred stocks, common stocks and retained earnings (Melicher & Norton, 2013). One of the key things to remember about a balance sheet and is indicated in the title ‘balance sheet’ is the left side and right side of the equation should be equal; Assets = Liabilities + Owner’s Equity (Melicher & Norton, 2013).
The Statement of Cash Flows The statement of cash flows provides a summary of the inflow and outflow of cash during a specified accounting period; it consist of three sections; operating activities, investing activities and financing …show more content…
Using ratios by comparing various numbers in a company’s financial statement allows more efficient analysis of performance when using the categories as the firm or company ] will not affect the outcome of the analysis since the numbers are put into a relative perspective by converting them to ratios.
The trend analysis is internal and is used to evaluate the company’s ongoing performance over time. The cross-sectional analysis is an analysis of various companies compared at the same point in time. Lastly, the industry comparative analysis is comparing the performance ratios of like industry companies to gauge the company’s performance against the industry average. As mentioned above, the primary advantage to using ratios is it allows comparison even when company sized are significantly different since the values are expressed in ratios rather than absolute
Many decisions about the operations in business are made based on the financial statements of the business. The financial statements of the business provide the manager with a working picture of the financial health, profitability and performance of the business. It provides investors a snapshot and long-term picture of the business and guides many investment decisions in the business as well as helps to track performance by reviewing its financial statements including income statements, balance sheets, and statement of cash flows.
The Purpose of the Income Statement The purpose of the income statement is simply to show the profit or loss of a business operation over a specified accounting period such as quarterly or annually …show more content…
Owner’s or shareholder’s equity is the funds supplied by the shareholder or owners (Melicher & Norton, 2013); it can be in the form of cash outlays or owner purchased assets or in the case of corporations it will be in the form three types of accounts, preferred stocks, common stocks and retained earnings (Melicher & Norton, 2013). One of the key things to remember about a balance sheet and is indicated in the title ‘balance sheet’ is the left side and right side of the equation should be equal; Assets = Liabilities + Owner’s Equity (Melicher & Norton, 2013).
The Statement of Cash Flows The statement of cash flows provides a summary of the inflow and outflow of cash during a specified accounting period; it consist of three sections; operating activities, investing activities and financing …show more content…
Using ratios by comparing various numbers in a company’s financial statement allows more efficient analysis of performance when using the categories as the firm or company ] will not affect the outcome of the analysis since the numbers are put into a relative perspective by converting them to ratios.
The trend analysis is internal and is used to evaluate the company’s ongoing performance over time. The cross-sectional analysis is an analysis of various companies compared at the same point in time. Lastly, the industry comparative analysis is comparing the performance ratios of like industry companies to gauge the company’s performance against the industry average. As mentioned above, the primary advantage to using ratios is it allows comparison even when company sized are significantly different since the values are expressed in ratios rather than absolute