Importance Of Financial Statements

732 Words2 Pages
bulb-icon

Recommended: Objectives of financial statements and the concepts underlying their preparation

Introduction
Financial statements are very important to a company because they measure a company’s performance. This performance statement can be viewed by the owners, possible investors, and lenders. This statement can make or break a company and is important that it is completed correctly. A Financial statement includes income statement, balance sheet, and statement of cash flows. In this essay I will describes the reason of the firm’s financial statements.
Income Statement Purpose
The income statement is the one of the most important and a large part if the financial statement. The income statement features the expenses, revenue, and either a profit or loss from the company during the fiscal month, year, quarter. One of the main purposes …show more content…

They are liquidity, profitability, and efficiency. Liquidity is ratio of assets to liabilities. This shows a company 's capability of paying their short term bills. The second is profitability and it shows the owners ability to exchange sales into profits. The last is efficiency and it includes inventory turnover and receivables turnover.
Conclusion
In conclusion a financial statement is very important to a firm to measure performance. A Financial statement includes income statement, balance sheet, and statement of cash flows. When reviewing a firm’s financial statement, a company uses three categories of ratios for the analysis of this finance statement and they are liquidity, profitability, and efficiency. In this essay I described the reason of the firm’s financial statements and why it is a very important to a …show more content…

Four Basic Types of Financial Ratios Used to Measure a Company’s Performance. Retrieved September 5, 2015
Kimball, T (n.d). The Three Parts of a Cash Flow Statement. Retrieved September 5, 2015
Lermark, H. (2003). Steps to a basic company financial analysis. Retrieved September 5, 2015.
Meleicher, R., &Norton, E. (2015). Indroduction to Finance: Markets, investment, and financial management (Fifthteenth ed.).
Russel, P. (2003). Financial Statement Analysis. Retrieved September 5,

Show More
Related

  • Financial Analysis of Verizon versus AT&T

    1338 Words  | 3 Pages

    ... organization's management. The ratios were broken down into classifications of liquidity and asset utilization, debt and interest coverage, profitability and market-based ratios.

    Read More

  • Harley-Davidson Performance Analysis

    1508 Words  | 4 Pages

    The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.

    Read More

  • Annual Report Financial Statements

    821 Words  | 2 Pages

    Melicher, Ronald W. and Norton, Edgar A. 2014. "Introduction to Finance: Markets, Investments, and Financial Management. 15th Edition". New Jersey: John Wiley and Sons,

    Read More

  • Accounting Case Study

    744 Words  | 2 Pages

    The Statement of financial position is a very useful tool full of information showing the position of an entity. However within this sheet of information lies a lot of limitations and problems. This essay will pinpoint some of the limitations and problems within the balance sheet. These limitations include how the balance sheet does not reflect the true financial position of a business, it does not reflect assets that can’t be measured monetarily and it also has a huge amount of estimated values and not actual verified values so this causes some controversy within the entity and its true position on the market. As well as the problems within the balance sheet there also lies a lot of problems with what’s left out of the balance sheet.

    Read More

  • Assessment of Financial Performance and Position of PQR

    1034 Words  | 3 Pages

    LIQUIDITY CURRENT RATIO QUICK RATIO EFFICIENCY DEBTORS DAYS CREDITORS DAYS STOCK DAYS 12.1 4.3 1.5 61 33 136 12.7 3.5 1.8 48 48 107 13.0 2.6 1.3 47 44 81 The report will be split into Profitability, Liquidity and Efficiency. under which the company’s financial statements will be analysis. some degree of a snare. The conclusion will bring the report together.

    Read More

  • Financial Ratio Analysis Report Of Ford Motor Company

    1668 Words  | 4 Pages

    Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.

    Read More

  • Financial Ratio Analysis

    1415 Words  | 3 Pages

    Marshall, D. H., McManus, W. W, & Viele, D. (2002). Accounting: What the Numbers Mean. 5th ed. San Francisco: Irwin/McGraw-Hill.

    Read More

  • Financial Analysis of Scholastic and Daktronics

    2133 Words  | 5 Pages

    Gibson, C. H. (2011). Financial reporting & analysis: Using financial accounting information. (12th ed.). Mason, OH: South-Western Cengage Learning.

    Read More

  • Citi Financial Statement

    880 Words  | 2 Pages

    Financial statements can provide a wealth of information about a given organization. These statements provide information about the company’s financial position, cash flows, operations, performance and changes in the financial position. This information may be used as part of the decision making process for employees, shareholders, investors and competitors. Based upon these financial statements, key ratios are used to provide additional insight as to the financial health of a given company. Being familiar with financial statements can increase financial literacy. For this discussion, Citigroup’s (Citi) financial statements will be reviewed.

    Read More

  • Financial Ratios, Discriminant Analysis and the Prediction of Corporate BankruptcyANKRUPTCY – ARTICLE SUMMARY

    872 Words  | 2 Pages

    Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound.

    Read More

  • The Purpose of Financial Statements

    1286 Words  | 3 Pages

    Ÿ Liquidity - This information comes from the Balance Sheet and the Cash Flow Statement. Ÿ Efficiency - This information can be found in the Balance Sheet but also some information from the Cash Flow Statement. They both show the use of company assets and the management of working capital.

    Read More

  • Financial Accounting: Analysis And Interpretation Of Financial Statement

    1059 Words  | 3 Pages

    The financial statement becomes a tool for future planning and forecasting. The analysis of these statements involves their division according to similar groups and arranged in desired form. The interpretation involves the explanation of financial facts in a simplifier way

    Read More

  • Kotak Mahindra Annual Report Analysis

    1724 Words  | 4 Pages

    "The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.

    Read More

  • Financial Statement Analysis Essay

    1022 Words  | 3 Pages

    The major objectives of financial statement analysis are reviewing the company’s performance over past periods, assessing the current financial position, forecasting profitability trends and forecasting financial failure (Fazal, 2011). These objectives in turn satisfy the ultimate objective of providing

    Read More

  • Accounting: Accounting And Accounting

    841 Words  | 2 Pages

    Income statement-: Income statement is the financial statement that measures a company 's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.

    Read More

More about Importance Of Financial Statements

Open Document