Financial Statement Differentiation Paper
There are many components to business administration. Among the important areas of business is the organization’s financial standing. Successful managers dissect the organization’s health through financial statements. Thus, financial results will serve as a valuable tool for decision-making in activities of financing, investing, and operating. Financial statements have profound importance in any business and its success goes back to the numbers. Hence, accounting and financial statements are a way for communicating the numbers and for managers to truly know their business (Kimmel, 2009).
Four Types of Financial Statements
Financial statements help to assess a business’ assets, expenses, and revenues. The four different types of financial statements are balance sheet, income statement, retained earnings statement, and statement of cash flows. These statements provide stakeholders valuable information to make decisions about the business.
A balance sheet consists of assets and claims to assets. The second type of financial report is an income statement, illustrating its revenue and expenses for a period of time. The third type of report is called retained earnings statement, the net income retained by a corporation. The fourth type of accounting information is a statement of cash flows, cash receipts and payments of a business.
Statements Appropriate to Stakeholders
Internal and external stakeholders may find the different types of reports helpful in decision-making. Investors, creditors, and management may find greater interest in one or more financial statements.
Investors or owners have a vested interest in the business, and they make decisions to buy, hold, or sell stock (Kimmel, 2009). Investors would find interest in the four different types of financial statements.
The balance sheet will inform investors of the organization’s assets and liabilities to assess the risk associated...