Financial Income Statements

Introduction

There are several methods used to measure the financial health of a company with the use of various statements all providing important financial data used by varying parties. Knowing and understanding the financial results of the company’s operations over a specific time period will aid in better decision making and future planning.

Income Statements Managers and business owners use income statements as a tool to visualize their profits and losses over a specific time period. Income statements can greatly differ between companies based on the industry. These reports are typically comprised of several major types of expenses to include; gross profit, operating income, income before taxes, and net income (Melicher

This statement provides management, owners, and executives with a snapshot of a company’s financial position within a specific time period. This is not to be confused with an income statement which focuses on the company’s operations. The major types of assets indicated on a balance sheet include; cash, accounts receivable, inventories, current, other, total, net, and other long-term assets (Melicher & Norton, 2014). Claims against a company’s assets can be made by creditors, owners, or

The statement of cash flows is beneficial to use with accrual accounting, because cash flows is a compilation of cash receipts, expenses paid in cash, and any changes in cash held by a company not including operating expenses (Epstein, 2011). A statement of cash flows is segmented into three standard sections or activities to include; operating, investing, and financing. Operating activities consists of the amount cash expended or the cash consumed by a company to conduct operating activities. Investing activities consists of any long term assets purchased or sold, such as equipment or facilities, or short term investments, such as stocks and bonds, sold during a specific time period (Epstein, 2011). Thirdly, financial activities consist of any payments made towards debts, or any debts incurred during a specific time