Financial statements, broken down
Financial Statements, Broken Down
Anthony Rice
Accounting/ACC561
29 April 2012
Instructor: Jill Datema
Financial Statements, Broken Down
If you can read a nutrition label or a baseball box score, you can learn to read basic financial statements. If you can follow a recipe or apply for a loan, you can learn basic accounting. The basics aren’t difficult and they aren’t rocket science (SEC.gov, 2007.) There are different people that depend upon what financial statements say in order to make decisions, such as investors, managers, and creditors. Each financial statement provides different information and some of the same information. The four financial statements used by many are the income statement, the balance sheet, the statement of cash flow and the statement of stockholder’s equity. This paper will briefly describe each and provide which statements are better for which professional utilizing them.
Income Statement
“An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue. The literal “bottom line” of the statement usually shows the company’s net earnings or losses. This tells you how much the company earned or lost over the period” (SEC.gov, 2007.) So, what seems most important from the income statement is the bottom line. This is very important to the investor. The investor is researching whether a company is profitable and provides a good bottom line. The income statement provides information, such as how much the company brought in, how much they spent and at the bottom, what they made at the end of the year or net profit. Another statement that includes the net profit is the balance sheet.
Balance Sheet
The balance sheet breaks down the company’s assets and liabilities. Included in this statement is the...