Financial Statement Paper
A business’ financial conditions are of major concern to all its stakeholders. As capital providers, investors and creditors rely on a company’s financial conditions for both the safety and profitability of their investments.
The four basic financial statements are (1) Balance Sheet, (2) Income Statement, (3) Statement of Retained Earnings, and (4) Statement of Cash Flow (Kimmel, Weygandt, & Kieso, 2010).
The balance sheet represents the financial position of a company for a specific period, and covers three main parts: Assets, Liabilities, and Stockholders’ Equity. Assets represent, tangible and intangible things of value that a company owns or control, for example; physical property includes inventory, cash, plant and equipment, etc. and intangibles such as Trademarks and Patents. Liabilities represent money a business owes to someone or an institution, for example: creditors, bank loan, government, etc. Liabilities also include obligations to provide goods or services to customers in the future. Last is stockholders’ equity. Stockholders’ equity represents what the company or business owes to the owners of the Business’s stock. This is the amount of money that remains after the business employment its assets to pay off debts. Below is the simple formula for the Balance Sheet.
ASSET=LIABILITIES + SHAREHOLDERS’ EQUITY
The Income Statement is used to report a business’ financial performance in terms of profits and losses over a specific period of time. The income statement covers two main elements, income and expenses. Income represents what the company has earned over a period of time, and expense are costs the business incurred over a period of time, for example, employee salaries and wages, rental payments etc. I consider the Income Statement to be the most important financial statement because it shows whether or not a company is achieving its financial goals or not. Below is an example of a simple income statement.
ABC Corporation, Inc.
The four basic financial statements are (1) Balance Sheet, (2) Income Statement, (3) Statement of Retained Earnings, and (4) Statement of Cash Flow (Kimmel, Weygandt, & Kieso, 2010).
The balance sheet represents the financial position of a company for a specific period, and covers three main parts: Assets, Liabilities, and Stockholders’ Equity. Assets represent, tangible and intangible things of value that a company owns or control, for example; physical property includes inventory, cash, plant and equipment, etc. and intangibles such as Trademarks and Patents. Liabilities represent money a business owes to someone or an institution, for example: creditors, bank loan, government, etc. Liabilities also include obligations to provide goods or services to customers in the future. Last is stockholders’ equity. Stockholders’ equity represents what the company or business owes to the owners of the Business’s stock. This is the amount of money that remains after the business employment its assets to pay off debts. Below is the simple formula for the Balance Sheet.
ASSET=LIABILITIES + SHAREHOLDERS’ EQUITY
The Income Statement is used to report a business’ financial performance in terms of profits and losses over a specific period of time. The income statement covers two main elements, income and expenses. Income represents what the company has earned over a period of time, and expense are costs the business incurred over a period of time, for example, employee salaries and wages, rental payments etc. I consider the Income Statement to be the most important financial statement because it shows whether or not a company is achieving its financial goals or not. Below is an example of a simple income statement.
ABC Corporation, Inc.