Financial Statements Of A Business 's Stock Price Essay

1021 WordsDec 18, 20165 Pages
Introduction Critical Financial Statements Financial statements most likely will consist of income statements, balance sheets, statements of retained earnings, and cash flow. Generally accepted accounting principles (GAAP) is the method of choice to maintain these records across domestic and international borders. Since these statements are regularly audited by government agencies or accounting firms to validate accuracy of these statements. Financial analysts utilize data to evaluate the performance and/or make predictions about the future of a business’s stock price. The three main financial statements are the balance sheet, the income statement, and the statement of cash flows. Balance Sheet A balance sheet is a summary of a business’s assets, liabilities, and owner’s equity at a specific period of time. The main purpose of a balance sheet is to give a snapshot of a business’s financial health while showing what the business owns and owes. Banks and other financial institutions use this information to determine how much credit to grant to a business when applying for various types of loans. As the name suggest, assets must equal liabilities and equity. Income Statement The income statement shows a detailed view of the revenue and expense of a business for a specified period of time. The income statement is divided into three parts: Total revenues, total expenses, and net income. Total revenue is for the reported period of time. Total expenses include all expenses

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