Xacc/280 Week 5 Assignment

Financial Statement Differentiation A Financial Statement can be defined as, “Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial position” (Business Dictionary, 2011). The Financial information is required for various users to make an informed Decision. “The purpose of financial information is to provide inputs for decision making” (Kimmel, Weygandt, Kieso, 2009, Para 1, p. 6). There are four different parts covered in a Financial Statement; those are Balance Sheet, Income Statement, Retained Earnings Statement, and Statement of Cash flow. The assignment will elaborate the purpose of each statement and differentiate its utility for different
14). The Balance sheet gives the exact money value worth of the assets over the liabilities of the company as of the specified time mentioned. The Balance sheet formula is “Assets = Liabilities + Stockholders’ Equity” (Kimmel et al., 2009, p. 14). The various resources possessed by a business such as property, cash, and equipment are Assets. Liabilities include the company’s payables to creditors and owners; the owner capital is also-called as Owner’s equity. A public company publicizes its Balance sheet to the general public. The creditors and investors use this statement to decide if they will invest in or lend to this company. The investors will see the likelihood of their money being repaid by the
For example a new Advertisement cost is $12000 for last quarter and Revenue did not move any further than it was before the Advertisement. Then they should rethink about continuing that Advertisement strategy.
Retained Earnings Statement “Retained earnings are the net income retained in the corporation” (Kimmel et al., 2009, p. 13). When a business makes profit it can decide to retain the earnings for business expansion or pay the owners back as dividend. The Retained Earnings statement shows the total Income, less the dividend paid to owners to determine the retained Earnings. The investors look at this statement to see usual dividend payment practice of the business. Some investors like companies paying the owners and some investors do not like these. This is because the dividend paid will bring down the company’s ability to pay the creditors.
Statement of Cash