Best Financial Statement

Typically, net profit is measured on a quarterly or annual basis. When compared with a company net profit during other periods, it can provide a useful measure for how profitable a company is over time and the overall performance of the company & management team.

2. Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures.

Interviews tend to be ineffective at predicting a candidate’s success, because they too often become get-to-know-you sessions, rather than focusing on the needs of the position.

I think that Net profit is more important than Gross profit because although the business could have £740,000 (2012) in Gross Profit, the business may have very high expenses therefore the net profit figures offer a more realistic figure of the finances available. The Net profit shows the actual profit once all expenses are deducted from the Gross profit. The expenses could be higher than the Gross profits which once deducted would leave the business at a loss when they thought they were making a profit from the Gross Profit. In 2012 the expenses were £733,000. Once this was taken off the Gross Profit it left a Net profit of £7,000. If the expenses were even higher than the Net profit figure this would have been a negative balance causing problems for the business.

When the executives decide that earnings should be retained, they have to account for them on the balance sheet under shareholder equity. This allows investors to see how much money has been put into the business over the years. Once you learn to read the income statement, you can use the retained earnings figure to make a decision on how wisely management is deploying and investing the shareholders ' money. If you notice a company is plowing all of its earnings back into itself and isn 't experiencing exceptionally high growth, you can be sure that the stock holders would be better served if the board of directors declared a dividend.

The net income is actually considerably different from the operating cash flow for multiple reasons. The first reason is non-cash expenses; these type of expenses are items such as depreciation or devaluing of something that was previously of higher value. Amortization of intangible assets, which is the steady reduction in recorded value of an intangible asset over time. These types of expenses truly do not require cash; outlays reduce net earnings but do not affect net cash outflow. Another imperative reason is that many timing differences occurring between the identification of revenue and expense and the incident of the underlying cash flow. In conclusion, the none operating losses and gains are used in the determination of net income, however, the associated cash flows are then classified as financing and investing activities, and they do not include operating activities.

The net income of an organization is calculated by subtracting total expenses from the revenue. The net income is generally referred to as the profit of the organization. However, the net income is used to determine how well an organization performed financially within a period of time. The net income is a better estimate of profitability than cash flow. The cash flow shows whether a business can sustain itself. The way an organization pays their bills can greatly impact the cash flow. The cash flow statement is useful to investors because the cash flow statement details where the cash is coming from, whether from loans, products or services, and investments (Wilkinson, 2014).

Return on net assets = Net Income in Statement of Operations / Net Assets in the Balance Sheet

“ The fact is that one of the earliest lessons I learned in business was that balance sheets and income statements are fiction, cash flow is reality” (Chocola, C 2014). Chocola is eluding to the possibility of a profitable company failing due to lack of cash flow. Cash flow is an accurate indicator of a company’s stability. The discrepancy between the balance sheet, income statement, and cash flow is due to revenue from sales being recognized on the balance sheet and income statement before it is collected. However, until the income from the sale is received there is no cash flow to reinvest, produce additional product to be sold, or to pay expenses. It is necessary to establish a positive cash flow before considering expanding a business.

Net income is total revenues minus total expenses incurred to generate those revenues all within the same reporting period. Net income is calculated by the accrual accounting methodology meaning that the expenses incurred to generate revenues are reported at the same time the related revenues are reported. Both revenue recognition and expenses paid may not coincide with actual cash transactions. Net cash from operating activities, on the other hand, is not determined by accrual but by

Where long-term profitability for an investor is the basis for the choice of where to invest, one should differentiate difference between net cash from operating activities and net income. Net cash from operating activities represents cash generated from the primary business function (Gibson, 2013), in this case food service. It is essentially a line item in the overarching net income of the company which demonstrates the company’s profitability.

Each user of the financial statements interprets the information in a different manor. They use the information to determine their interactions with the organization. Management, investors, and employees use the same information from the financial statements but for different purposes. These four basic statements are the fundamentals of accounting which can be much more detail and complex. They do not need to be more complex for the users of the information; these basic statements have all the information needed to make

have explained that the Financial statements provide asummarized view of the financial position and operations of a firm. Therefore, much can belearnt about a firm from a careful examination of its financial statements as invaluabledocuments / performance reports. The analysis of financial statements is, thus, an important aidto financial analysis.

One of the important cases that a company cares about is profitability. Undoubtedly it plays a great role in the overall performance of an entity and define the actions must be made to improve it. Being on of the indicators of profitability net margin indicates how well companies can convert their revenue into profit.

The amount shown on the income statement under discontinued operations is the profit made during the period from the businesses that will not be a part of the company in the future. The net profit for the year of Reed Elsevier is higher almost by 50% due to the profit made from discontinued operations. The net profit of the Thompson Corporation has also grown by almost 4 times, which is also due mostly to the earnings from discontinued operations.