Companies in Today's Market
Companies in the business world right now are searching for something to hold onto. The financial market in particular is in a lot of danger. The fall of a very prominent investment company set the stage for last month’s stock market fall resulting in job losses all over the world. What could or should have helped prevent this fall in the market?
All companies need to be able to see financial progress or they would not know if their company is successful and making a profit. Accountants are often asked by entrepreneurs “Can you just tell me the bottom dollar”? Financial accounting is a system that prepares various reports to provide answers to that specific question. The role of financial accounting is not to show the value of a company, but rather it provides enough information for others outside the company to determine the value of the company for themselves.
Where Do I See The Bottom Dollar
Businesses have two primary objectives: to remain solvent and to earn a profit. A company's solvency is the ability of the business to pay its bills and service its debt. The better their solvency, the better they are financially. This is different from a company being profitable. There are four financial reports that show business owners their profitability: the Balance Sheet, the Income Statement, the Statement of Owner's Equity, and the Statement of Cash Flows. These reports are also the financial product of an accountant's analysis of the transactions of the business. A lot of effort goes into preparing these financial statements.
The Balance Sheet shows a particular point in time. It highlights what resources are owned by a business (assets) and what it owes to other parties (liabilities). It also shows how much has been invested in the business and what the sources of that investment were. The balance sheet is often referred to as the “snap shot” of the business, or a picture of the financial position at that specific...