Financial Statements Are Used For Track Performance And Explain Differences

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

(Ohara, 2007) Most financial statements are made public for the benefit of stakeholders and potential investors. The bottom-line is that financial statements are the main source for analyzing how well a company is operating. The income (or profit and loss) statement is simply a report card of how much activity (revenue) was performed in the period, how profitable that activity was (gross profit/loss), and what it cost the contractor to run the business (overhead). (Murphy, 2006)

Understanding the finances of a company is important but knowing the significance of the financial statements is crucial to the operations as well. Reviewing the statement of financial position, operating statement and statement of cash flows serve as a guidance to management and executives on the day-to-day activities of an organization (Finkler et al., 2013). For example, the statement of financial position (balance sheet) shows the assets and

This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement

Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

The income statement is a financial statement that measures all of a company’s revenues, gains, expenses, and losses incurred to essentially generate a net income. Drawing from all forms of revenue and expenses including, the income statement represents the most accurate projected profitability of a company.

The first of the financial statements is the income statement. The income statement states the revenues and expenses in an understandable way that shows a clear picture of net income or net loss for the

The financial statements that a company produces can be used to help evaluate the financial condition of the company. The main statements are the income statement, the balance sheet and the statement of cash flows (Harper, 2012). The company's performance can be evaluated in a number of different ways. The most important are that the company can be evaluated against its own past performance, and it can also be evaluated against other firms in the same industry.

The four basic financial statements including the balance sheet, income statement, statement of retained earnings, and cash flow statement together form the foundation of financial reporting for a business. The intent of this paper is to define the purpose of these four statements, how these statements are useful for internal managers and employees, and how they are useful for those external to a company incouding investors and creditors.

The income statement measures the flow of business activity by comparing revenues to the expenses over a period of time, as opposed to the momentary status of the business at a point in time (Brian P. Brinig, 2011). The income statement is important because it lists the amount of expenses that were incurred to create the revenues of the company. The biggest typical expenses for a company are the cost of goods sold, advertising and promotion, depreciation, wages and salaries, and rent.

The income statement is an important tool for tracking cash flow in and out of an organization. The income statement tracks revenue and expenses over a period of time, or accounting period (Melicher & Norton, 2014, p.

The income statement is one of the major financial statements used by accountants and business owners. The income statement is sometimes called profit and loss statement, statement of operations or statement of income. It is important because it shows the profitability of a company during the time interval specified on the heading. The income statement shows revenues, expenses, gains, and losses; it does not show cash receipts nor cash disbursements. People pay attention to the profitability of a company for many reasons, and the income statement helps in doing this in that it helps current lenders and investors, company management, competitors, government agencies, labor union, and others. The expense items located on the income statement appear under five major categories

According to Melicher and Norton (2014), the primary purpose of the income statement is to provide a concise report of the revenues generated and expenses incurred by a business entity over a defined time period – typically a quarter or a year. Importantly, the revenues and expenses referred to in the income

The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ