Tracking Company Performance With Financial Statements

733 Words Aug 12th, 2015 3 Pages
Tracking Company Performance with Financial Statements
To determine the health of a company, the managers within the firm utilize financial tools. Financial statements help the management team determine the health of a company. These tools include the income statement, balance sheet and statement of cash flows. The data that these documents provide assist the owners in making key strategic decisions. Additionally, this data assists lenders as to the in the viability of their commitment to credit lines.
Income Statement An income statement discloses profit or loss of a company. This is often the first document to be reviewed in accessing the health of an organization. The date is most valuable to an experienced manager. For example, profits will be different with a start-up than for an established firm.
There are several major types of expenses reported on the income statement. The cost of goods sold (COGS) is a record of all raw materials that go into the production of a final product. Purchasing, receiving, cost of money and production etc. are not included.
Operating expenses are often divided between marketing and general and administrative (G & A) expenses. Marketing is often a blanket category for marketing and sales. Sales typically generate revenue whereas marketing is a cost center. G & A includes all other expenses including labor, administrative staff to name a few. Other considerations include allowances for bad debt, pension programs and physical buildings.…
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