Corporations And Their Financial Performance

896 Words Aug 12th, 2015 4 Pages
Corporations and Their Financial Performance Have you ever wondered exactly how major corporations manage their earnings and spendings? Each company needs to be able to keep track of the flow of their money, whether it is coming in or going out. They also need to have it documented and provide it to certain individuals. This report is a summary of their financial performance, comprised of every revenue, expense, asset, liability, and equity that company made over the past year. They provide this report to their shareholders, it is a very important tool of communication between manager and owner, and it is used for tax purposes. In order for corporations to account for their financial transactions, they need to prepare three things; an income statement, a balance sheet, and a statement of cash flows. Every major firm, company, or corporation has an income statement. The income statement details the types of risk that firm has and where it is coming from. It states the revenues or sales generated from the operations of the business, and incurred expenses by that corporation over that accounting period (usually quarterly or annually). A major expense for the corporation is the cost of sales or services, such as; raw materials, labor, and manufacturing that is used in the production of the goods they sell (Loth, n.d.). Another major expense that would be listed is the interest expense, and this would be subtracted from the operating income. Interest expenses happen when the…
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