Financial Statements

In: Business and Management

Submitted By piznaz
Words 297
Pages 2
There are four basic financial statements used by all companies. The income statement, balance sheet, statement of equity, and statement of cash flows. Each statement allows the reader to identify specific information about that business and the financial stability the company may have. Each statement is prepared during a specific time period except the balance sheet which uses a specific point in time.
The income statement is reveals the amount of revenues or sales and expenses for a period of time. When there are more revenues than expenses this will reveal a net income or net profit for that time period. However, if there are more expenses then revenues for that same time period a net loss will incur. This statement tells the reader how profitable a business is during a period of time.
A statement of owner’s equity explains changes in equity or owner’s worth over a period of time. Increases and decreases in equity can be contributed to net profit or loss, investments, or withdrawals during that period. This statement allows the reader to see the worth of a company when liabilities are subtracted from assets.
The balance sheet describes the company’s financial position from a specific point in time. This statement shows the types and amounts of a company’s assets, liabilities, and equity at any given point in time. The advantage to this statement is that account totals can show readers exactly where the company is financial.
Finally, the statement of cash flows records the inflows and outflows of cash over a period of time. This allows the reader or investor to see if the company has a proper handle of cash control within the company. Too much cash on hand may indicate that the company has a poor control over cash…...

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