Performance Analysis Of The Company 's Financial Statement

785 Words Dec 7th, 2015 4 Pages
Managers within a firm, including the owners and lenders, need to track the firm’s performance in order to be successful. Those individuals are able to review performance through analysis of the company’s financial statements. A firm’s financial statement consists of a firm’s income statement, balance sheet, and cash flow (In/Out). Businesses use these reports to understand the financial position of the firm. The reports can also serve as a tool when making decisions on how the firm will operate in the future and where it will go (Boundless, 2015). First off, a firm’s income statement or profit and loss statement is the overarching report of revenues generated and the total amount of expenses that have been incurred throughout a specified duration of time (Melicher & Norton, 2014, p. 357). A primary purpose of an income statement is to provide data on the company’s profitability (Boundless, 2015). It can also provide insight on past financial performance, predict future performance, evaluate the ability to generate revenue, and compare differences in expenses and revenue year to year. An income statement provides the foundation for a variety of decisions by understanding the financial positon of the firm and providing insight on where to make changes in the future. Typically, a financial statement will break down expenses as the 1.) Cost of Goods Sold, 2.) Selling, General & Administrative Expense, 3.) Depreciation and 4.) Other Expenses (Melicher & Norton, 2014, p.…
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