Financial Statements And Financial Performance

932 Words Sep 9th, 2015 4 Pages
Introduction
In an economic market place, business financial performance is essential to survival. Regardless of the organization’s composition and type, whether for-profit or not-for-profit, financial statements provide the necessary feedback concerning the firm’s performance. Although there are different types of financial statements, the basic and most common ones are the income statement, balance sheet, and statement of cash flows. The information provided on these formal records are of great importance to business managers, owners, and investors. Additionally, depending on the business, these financial statements can be much more complex in comparison to other organizations’ statements. The following paragraphs will discuss the purpose and major components of these three financial statements.
Income Statement The purpose of the income statement is to determine the organization’s income, expenses, and profits. The statement identifies all three major areas relative to a time period. One of the major income statement expenses is cost of goods sold, also referred to as COGS (Business Encyclopedia, 2015). This expense is associated with manufacturing or producing goods and delivery of services. Additionally, cost of goods sold is described as the overall cost associated with buying a raw good and making it a finished good. Operating expenses for selling is a second major expense on the income statement. These expenses are associated with selling such as…
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