ACC 290: The Purpose Of Financial Statement
Financial Statements Paper
ACC/290
September 04, 2013
University of Phoenix
Financial Statements Paper
Many businesses continue to rise and fall in a tremendously competitive environment in the United States and across the world. There are several internal factors such as managers or employees and external factors such as competition or government interference that drive the success and profitability of a business or organization. One major component of operating a successful and profitable business is the management of financial statements. Properly maintained and accurate financial statements are a very important aspect of business in today’s globally growing and technologically advanced economic competitive market. …show more content…
The purpose of balance sheets is to provide users with the current financial position of a business based on what it owns and owes (Kimmel, Weygandt, & Kieso, 2010). For instance, creditors analyze balance sheets to determine the likelihood a debt will be repaid (Kimmel, Weygandt, & Kieso, 2010). Income statements provide a summary of gains, losses, revenues, expenses, net income, and net loss of a business for a specific period (Hillstrom & Hillstrom, 2002). The purpose of income statements is for users such as investors to predict future profitability of a business to determine whether to buy or sell stock invested in a specific business (Kimmel, Weygandt, & Kieso, 2010). Retained earnings statements show the amounts and causes of change in net income retained in a business during a period of time (Kimmel, Weygandt, & Kieso, 2010). The purpose of retained earnings statements is to determine how much of a company’s profit is lost in paying dividends to shareholders (Kimmel, Weygandt, & Kieso, 2010). Users can determine whether to invest or not invest in a company that pays high dividends. Cash flow statements summarize a business 's cash payments and receipts relating to its operating, financing, and investing activities during a particular period (Hillstrom & Hillstrom, 2002). The purpose of cash flow statements is to provide users with information about cash payments and receipts to determine how a company is obtaining and using its most important resource, money (Kimmel, Weygandt, & Kieso, 2010). These financial statements are key components for internal and external users to make economic
ACC/290
September 04, 2013
University of Phoenix
Financial Statements Paper
Many businesses continue to rise and fall in a tremendously competitive environment in the United States and across the world. There are several internal factors such as managers or employees and external factors such as competition or government interference that drive the success and profitability of a business or organization. One major component of operating a successful and profitable business is the management of financial statements. Properly maintained and accurate financial statements are a very important aspect of business in today’s globally growing and technologically advanced economic competitive market. …show more content…
The purpose of balance sheets is to provide users with the current financial position of a business based on what it owns and owes (Kimmel, Weygandt, & Kieso, 2010). For instance, creditors analyze balance sheets to determine the likelihood a debt will be repaid (Kimmel, Weygandt, & Kieso, 2010). Income statements provide a summary of gains, losses, revenues, expenses, net income, and net loss of a business for a specific period (Hillstrom & Hillstrom, 2002). The purpose of income statements is for users such as investors to predict future profitability of a business to determine whether to buy or sell stock invested in a specific business (Kimmel, Weygandt, & Kieso, 2010). Retained earnings statements show the amounts and causes of change in net income retained in a business during a period of time (Kimmel, Weygandt, & Kieso, 2010). The purpose of retained earnings statements is to determine how much of a company’s profit is lost in paying dividends to shareholders (Kimmel, Weygandt, & Kieso, 2010). Users can determine whether to invest or not invest in a company that pays high dividends. Cash flow statements summarize a business 's cash payments and receipts relating to its operating, financing, and investing activities during a particular period (Hillstrom & Hillstrom, 2002). The purpose of cash flow statements is to provide users with information about cash payments and receipts to determine how a company is obtaining and using its most important resource, money (Kimmel, Weygandt, & Kieso, 2010). These financial statements are key components for internal and external users to make economic