Accounting Essay

2949 Words May 1st, 2015 12 Pages
SMT640
Group Research paper
Fall 2014

You have been named the Chief Financial Officer (CFO) of a two year old company, CUNY Analytics. Financials have been prepared by a bookkeeper. As CFO, you responsible for the preparation of accurate financials, analysis and review of the financials before they are released and communication of the results of your company to banks, investors, creditors and the government, as necessary.

Please complete the following:

a. What are the four major financial statements and, in depth, discuss their purpose.

The four major financial statements are the balance sheet, the income statement, the retained earnings statement and the statement of cash flows.

The Balance Sheet reports the company’s
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If the company is predicted to be well off and can meet its obligations, then investors will buy stock. If it seems like the company will not do well, then they will sell or just not buy any stock costing the company its investors.
The Retained Earnings Statement provides users the net income retained in the business for a specific time period. It shows the amount and cause of changes during a reporting period while simultaneously allowing users to evaluate dividend payment. External users mainly use this because they evaluate the dividend payout.
The Statement of Cash Flow provides information about cash receipts and cash payments of a business at a specific period of time. It provides an idea of the company’s cash position, which includes the net increase and decrease, inflows and outflows of cash through three major components: operating activities, investing activities, and financing activities over an accounting period. The operating activities include the cash effects of transactions that create revenues and expenses. It helps determine net income for that year. The investing activities include the sales and purchases of the company. It also includes the lending of money and the collecting of loans. The financing activities section shows how cash was obtained from issuing debt and repaying the amounts borrowed and obtaining cash from stockholders, repurchasing shares and paying dividends. Therefore, the three components show where the cash came from, how and

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