Understanding Financial Statements: A Comprehensive Overview

Financial Statements In this paper the three major types of financial statements will be discussed. The three major types of financial statements are income statement, balance sheet and cash flow statements. It will also talk about owners’ equity. The paper will also touch on some key points in each of the three types of financial statements and owners’ equity.
The income statement will report the revenues generated and expenses experienced by the firm over a certain period like a quarter or a year. There are several major types of expenses on the income sheet and they are operating income, income tax and cost of goods sold or COGS. Cost of goods sold is the cost of making or manufacturing the goods sold to earn more money. They reflect the production such as labor, raw materials, these are direct costs. They will also vary because the amount of goods produced will vary day to day (Melicher, Norton, 2013). The operating
There are three standard sections and they are investing activities, operating activities and financing activities (Melicher, Norton, 2013). Investing activities will report change in a company’s cash position resulting from losses or gains from investments in operating subsidiaries and financial markets as well as changes in amount of money that is spent on the capital assets like equipment and plants. Operating activities are calculated by adding depreciation and EBIT then subtracting taxes. Operating activities is the money a company earns from regular business activities like selling goods, manufacturing goods or providing a service. Financing activities that track a company’s external activities that help a company raise capital and repay investors, an example of this is cash dividends, issuing more stock or changing loans. It will show investors how strong a company is