Financial Statements And Financial Performance

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Financial Statements Firm owners as well as managers keep track of the company’s financial performance by maintaining at least four major financial statements. The major financial statements include Income statement, Balance sheet, stockholder’s equity statement, & cash flows statement. Each financial statement provides different type of activity of the company 's financial status in the particular period. Financial statements are usually prepared based on the company’s need it could be monthly, quarterly, semiannually and annually. Income Statement The purpose of the income statement (profit and loss or P&L) is to analyze the business or the company’s revenue and expense during certain period of time. This period could be monthly, quarterly or yearly based on the company’s need. There are several uses for the P&L statement. First, Investors can use the income statement to determine the risk of investing in a company after comparing the trend of the P&L for different periods. Second, Business owners and managers are able to analyze the company’s profitability by looking at the revenue and expense break down by account and determine if the cost is too high or workable. Third, P&L indicates the Revenues and expenses related to operation cost and non-operation cost, for example a clothing company for making sport cloth, the operating expense could be anything related to cost of goods directly to make the cloth, any expenses that is not related directly to making the cloth as
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