Financial Income Statements
explanatory Essay
829 words
Introduction
There are several methods used to measure the financial health of a company with the use of various statements all providing important financial data used by varying parties. Knowing and understanding the financial results of the company’s operations over a specific time period will aid in better decision making and future planning.
Income Statements Managers and business owners use income statements as a tool to visualize their profits and losses over a specific time period. Income statements can greatly differ between companies based on the industry. These reports are typically comprised of several major types of expenses to include; gross profit, operating income, income before taxes, and net income (Melicher
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In this essay, the author
- Explains the various methods used to measure the financial health of a company with the use of various statements.
- Explains the importance of a balance sheet, noting it provides management, owners, and executives with an accurate snapshot of the company's financial position, including cash, accounts receivable, inventories, current, other, total, net and other long-term assets.
- Explains that companies have owner's equity, whether it is the investment of owners or an owner’s investment. the portion of assets owned by a company is reflected in equity accounts, most often known as common stocks and retained earnings.
- Explains that a statement of cash flows is beneficial to use with accrual accounting because it includes cash receipts, expenses, and changes in cash held by the company not including operating expenses.
- Explains the process of analyzing a company's financial statements, which allows management, executives, owners, stakeholders, the local and federal government, and the public to make better informed financial decisions.
- Opines that present and potential shareholders will have a vested interest in examining financial statements to stay abreast of the company’s performance.
- Cites epstein, l., "business owner's guide to reading and understanding financial statements: how to budget, forecast, and monitor cash flow for better decision making."
This statement provides management, owners, and executives with a snapshot of a company’s financial position within a specific time period. This is not to be confused with an income statement which focuses on the company’s operations. The major types of assets indicated on a balance sheet include; cash, accounts receivable, inventories, current, other, total, net, and other long-term assets (Melicher & Norton, 2014). Claims against a company’s assets can be made by creditors, owners, or …show more content…
The statement of cash flows is beneficial to use with accrual accounting, because cash flows is a compilation of cash receipts, expenses paid in cash, and any changes in cash held by a company not including operating expenses (Epstein, 2011). A statement of cash flows is segmented into three standard sections or activities to include; operating, investing, and financing. Operating activities consists of the amount cash expended or the cash consumed by a company to conduct operating activities. Investing activities consists of any long term assets purchased or sold, such as equipment or facilities, or short term investments, such as stocks and bonds, sold during a specific time period (Epstein, 2011). Thirdly, financial activities consist of any payments made towards debts, or any debts incurred during a specific time
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- Financial Statement Analysis Essaycomparative essayFinancial statements are formal reports which show the current financial position of an entity. There are three main types of financial statements; the balance sheet, the income statement and the cash flow statement (Business Dictionary, 2016). Financial statement analysis refers to the analysis and interpretation of those three main financial statements. It can also be defined as understanding the risk and profitability of an entity (Ready Ratios, 2013). There are different techniques of financial statement analysis including ratio analysis, vertical or common size analysis and horizontal analysis or trend analysis. Another technique sometimes applied is trend analysis of the ratio analysis (Hancock, Robinson and Bazley, 2015).
In this essay, the author
- Explains that the ceo of cardno is michael renshaw and the chairman is john marlay. the following table details their qualifications and remuneration.
- Explains that the roa ratio measures how effectively a company can earn return on its investment in assets.
- Explains that financial statements are formal reports which show the current financial position of an entity. there are different techniques of financial statement analysis including ratio analysis, vertical or common size analysis and horizontal analysis.
- Describes the key stakeholders of cardno, including the government, employees, and shareholders.
- Explains that cardno has eight directors on the board, all of whom have academic qualifications. the ratio of cash to non-cash ceo remuneration is 699360:0.
- Compares the shares of cardno limited and asx200 over the 6 months prior to the 2014 financial year.
1022 wordsRead More - Understanding Financial Statements and Cash Flowexplanatory essayAn entrepreneur’s dream of starting a business is all about getting an idea to the marketplace with great expectations of striking it rich. Little thought ever goes into the steps and methods on how to get there. It takes a lot of effort and forethought setting up strategic plans in areas of cost effectiveness, best in quality, and on time delivery. All three areas require careful financial planning and reporting. This paper discusses the basics in understanding the basics of four different types of financial statements paint a picture of a business’s cash flow. The latter part of the paper will summarize the importance of a company’s financial statement regarding its success in critical decisions to improve its market share in the global market.
In this essay, the author
- Explains that an entrepreneur's dream of starting a business is all about getting an idea to the marketplace with great expectations of striking it rich.
- Explains that success is measured based on the bottom line comparing company profitability from one year to the next in comparison to its competitors.
- Explains the purpose of the balance sheet, which is to show the financial position or value for a particular period of time.
- Explains that a company's assets are items of value to the company that are both tangible and non-tangible used to provide products or services for sale.
- Lists the company's liabilities on the balance sheet based on their due dates. they are broken down into current and long-term liabilities.
- Explains the shareholders' equity section of the balance sheet known as the company's capital or net worth. the shareholders' portion is their investment in purchased stock minus incurred costs to run the business.
- Explains that the balance sheet shows a snapshot shot of the company's assets minus liabilities and shareholders' equity. the assets column on the right side must equal the liabilities.
- Explains that the second financial statement is the income statement, which takes into account revenue, cash inflow, minus expenditures to operate the business, and cash outflow to determine the company's net worth.
- Explains that the third financial statement used among businesses is the statement of retained earnings. the purpose of this statement is to show shareholders the company's ability to reinvest for future growth in the market.
- Explains that the statement of cash flow summarizes the amount of money flowing in and out of a company.
- Concludes that a company's financial statements are critical to all concerned. they provide critical tools for companies to make decisions to improve its share value in the global market of fierce competition.
1226 wordsRead More - Of The Income Statements, Income Statement, Balance Sheet, And Statement Of Cash Flowscomparative essayIntroduction Managers within the firm, as well as the firm’s owners and lenders, keep track of the firm’s performance by reviewing its financial statements - income statement, balance sheet, and statement of cash flows. I will discuss several items regarding these financial statements. Firstly, I will discuss the purpose of the income statement and identify the major types of expenses that are shown on the income statement. Secondly, I will discuss the purpose of the balance sheet and identify the major types of assets, including the claims of creditors and owners shown on the balance sheet.
In this essay, the author
- Explains that managers, owners, and lenders keep track of the firm's performance by reviewing its financial statements — income statement, balance sheet and statement of cash flows.
- Explains that an income statement reports the revenues generated and expenses incurred by a firm over an accounting period.
- Explains that there are three different accounts that comprise the owners equity section: preferred stock outstanding, common stock account or capital paid in excess of par, and retained earnings account.
- Concludes that the major three accounting statements utilized were discussed at length. they are critical tools for any investor to truly understand what a company’s financial health is.
- Explains melicher, w., & norton, e. introduction to finance: markets, investments, and financial management.
- Explains the purpose of the balance sheet, which is to show to prospective investors and the like a company's financial stature.
- Explains that the statement of cash flows is utilized to measure the changes in cash flows, in combination with the income statement and the balance sheet, to give an accurate picture of the financial status of a company or business.
918 wordsRead More - The Four Characteristics Of The Four Financial Statementsexplanatory essayThe Four Financial Statements Financial statements are accounts or records that summarizes fiscal or monetary activities of an organization, an individual, or any article or unit. Fraser and Ormiston informed us that financial statements can seem like a map or maze. As a map it clarifies things but as a maze it can be quite complex. Even though financial statements can be either a maze or a map, it should only be a map.
In this essay, the author
- Explains that financial statements can seem like a map or maze, but they should only be maps. they remind us of leviticus 19:35-36, which states that we should use honesty.
- Explains that the balance sheet is a financial statement that shows things such as assets, liabilities, and stockholders' equity.
- Explains that income statements are revenues, expenses, net profits or loss, and net profit per share for an accounting period.
- Explains that cash flow statements inform investors where money is coming as well as going, making sure everything is accounted for.
- Explains that the statements of shareholders' equity details the transactions that affect the balance sheet equity accounts during an accounting period.
854 wordsRead More - Financial Analysisexplanatory essayFinancial statements are vital for any organization regardless of the size or method of ownership. The financial statements of an organization include the balance sheet, the income statement, the statements of owners’ equity and the statement of cash flows. The reports provided by financial statements are necessary for internal and external use. Ratios for analysis and comparison measure an organization’s performance (Holt, 2014, p. 22) and are prepared using the information from the financial reports. Financial analysis judges an organization’s history and collects information to project its future (Holt, 2014, p. 25). To examine the ongoing profitability of an organization, pro forma financial statements are prepared.
In this essay, the author
- Explains that financial statements are vital for any organization regardless of its size or method of ownership. ratios for analysis and comparison measure an organization’s performance and are prepared using the information from the financial reports.
- Explains that capital investments increase firm's assets by providing returns for a period greater than one year. capital budgeting evaluates capital investment proposals and uses qualitative and quantitative analysis.
- Explains that capital budgeting is necessary when considering mergers or acquisitions. acquisitions occur when one organization absorbs another and adds value to the acquiring organization.
- Explains that a financial manager determines the financial needs and efficiency of the organization to raise the capital necessary to remain viable.
- Explains that financial managers must understand corporate finance and forecast and prepare pro forma financial statements. the desire for riches leads to temptation and these harmful desires ruin men.
- Explains fackler, m. (ed. ), 500 questions & answers from the bible. barbour publishing, inc.
- Explains that ross, s. a., westerfield, r. w. & jordan, b. d. (2011). essentials of corporate finance.
- Explains that pro forma financial statements are essential for internal and external groups to use in planning, operating, investing, and financing decisions.
- Explains that managers realize an organization must create value to increase the value of the organization’s stock.
- Explains how the internal rate of return determines if a capital investment will exceed other market investments with the same risk factors.
1607 wordsRead More - Financial Statementsopinion essayIn recent history, there have been quite a few memorable cases of corporations manipulating financial reports in order to deceive stakeholders. Deceptive accounting practices are like a disease, and should be rooted out immediately. These practices undermine the stability of U.S. financial markets, and can make people less willing to invest in stocks. Financial reporting is the key to maintaining trust in the financial system and any manipulation should not be tolerated.
In this essay, the author
- Opines that deceptive accounting practices undermine the stability of u.s. financial markets and can make people less willing to invest in stocks.
- Explains that financial statements are the primary instruments used in assessing the performance of a business and its managers.
- Explains that earnings management is an unethical practice that affects reported income and provides no true economic advantage to the organization. financial reporting must be ethical and moral.
- Opines that ethical accounting practices should never be circumvented. enron used creative accounting methods to defraud stakeholders out of millions of dollars.
- Opines that it is imperative that a publicly traded company's financial statements reflect its true state. greed can drive individuals to take risks with others' money, and only those with the highest moral fortitude should have governance over the finances.
- Analyzes how managers favored manipulating short-term earnings by utilizing overtime as opposed to offering extended credit terms.
- Explains gibson, c. h., gowthorpe, & amat, o. (2005). creative accounting: some ethical issues of macro- and micro-manipulation.
943 wordsRead More - Accounting In Society Essayexplanatory essayIncome statements also called Profit and Loss statements (statement of earnings, income, or operations). These statements are used to report the company’s net profit or loss over a specified financial period. It is arrived by deducting the company’s expenses from the company’s total income.
In this essay, the author
- Explains that financial statements are formal records that represent the financial activities of any business entity. they are used to calculate the performance, financial strength and liquidity of a company.
- Explains that balance sheets are used to report the financial position (assets, liabilities, and stockholder’s equity) of a business.
- Explains income statements, also called profit and loss statements (statement of earnings, income, or operations), are used to report the company's net profit or loss over a specified financial period.
- Explains the cash flow statement, which gives a summary of movement in cash and bank balances over the given financial period – cash within the company.
- Explains that segregation of duties reduces the chances of error or fraud by one person.
- Explains how the supervision and monitoring of operations ensures effectiveness and efficiency of operational activities.
- Explains that it can be used to ensure that access to data and systems is restricted to authorized personnel only through access logs and passwords.
- Explains that the most effective financial statement in communicating the financial health of an organization is the statement of changes in equity.
- Explains the main function of an accountant is to ensure the company’s financial events are collected accurately and appropriately recorded and financial reports generated.
- Explains that a service company is easier to start and manage compared to merchandise business. a company's chart of accounts should include accounts that give information as to where cash is coming from and where it is going
- Explains that accounting programs automate functions such as invoicing, payments, paying salaries and wages, and provide regular accounting reports. the overall advantage of automating accounting processes is efficiency.
860 wordsRead More - Citi Financial Statementargumentative essayEvery Number Tells a Story Financial statements can provide a wealth of information about a given organization. These statements provide information about the company’s financial position, cash flows, operations, performance and changes in the financial position. This information may be used as part of the decision making process for employees, shareholders, investors and competitors. Based upon these financial statements, key ratios are used to provide additional insight as to the financial health of a given company. Being familiar with financial statements can increase financial literacy.
In this essay, the author
- Explains that financial statements provide information about a company's financial position, cash flows, operations, performance, and changes in the financial situation.
- Explains that they chose citi because they want to know that their employer is financially solvent. citi's income statement, balance sheet, and statement of cash flows are reviewed.
- Explains that the balance sheet provides detailed information about citi's assets, liabilities, and shareholder’s equity. it shows what citi owns and owes at a fixed period of time.
- Explains that the statement of cash flows reports a company's inflows and outflow of money, and the cash flow from operations. financial statements provide information for investors.
- Analyzes how citi's financial statements demonstrate the effectiveness of its strategy and goals. revenues increased by 3% and core operating expenses remained flat.
- Recommends citi stay true to its mission of providing financial services that enable growth and economic progress. us news and world report ranked citi as one of the top ten banks of 2016.
880 wordsRead More - Essay On Accounting Equationexplanatory essayThe statement of profit or loss is also known as income statement and it’s equation is revenue minus expenses equals profit or loss. The statement of profit or loss summarize the revenues and expenses of a business and also shown the ability of a business to generated business. The total profit or loss that generated in an organization during an accounting period can be seen through the income statement. For example, if the expenses of the company are higher than revenues, the company will get a loss in the business. However, the company will generate a profit when the revenues are greater than the
In this essay, the author
- Explains that the accounting equation maintains for all transactions and business activities. every asset that a company hold is always equal to the liabilities and equity.
- Explains that assets are the resources for running the business work. assets are divided into two categories: non-current assets and current assets.
- Explains that liabilities are debts owed by a company to solve the business problem. non-current and current liabilities can be divided into two categories.
- Explains that equity is the resources that are provided by the owner for the business use.
- Explains that revenue is the income earned by a business that will increase the asset while expenses are expenditure pay by business.
- Explains the importance of making a profit in business because it confirms the truth of your business powerfully.
- Explains that business can calculate their profit using the equation profit = revenue – expenses. business must calculate business revenue and expenses to get their final amount of business profit.
- Explains that profit varies greatly from company to company or industry to industry, so it is always better to consider profit as a percentage of sale when comparing companies.
- Explains that the higher the profit represents the successful of the business while the lower will represent the weak. the accounting cycle records business transactions during the accounting period.
- Explains that the first step to start the accounting cycle is systematizing and analyzing the transaction or data from the economic events.
- Explains the steps of recording the adjusting entries and trial balance, which are used to record the accrual basis of accounting such as devaluation, depletion and amortization.
- Explains that the post-closing trial balance is the end of accounting cycle and it will start again with the first step in the next accounting period.
- Explains that there are two types of account information, which are internal users and external users. management, employee, and owner use the accounting information to make decisions for planning and controlling business activities.
- Explains that external users are people who didn't involve in the organization and business activities but interested in financial information and the performance of the company.
- Explains the purpose of each type of financial statement. the financial statements provide accounting information about financial position, profit or loss, changes in equity, and cash flows.
- Explains that the statement of financial position shows the current assets, liabilities, and equity owned by a business during an accounting period.
- Explains that the statement of cash flows provides information about the gross receipts and gross payments of a company. it reports the cash generated and used during the operations, investing and financing activities.
- Explains that the statement of changes in equity allows financial statement readers to figure out the factors that cause a change in owners' equity in the accounting periods.
- Concludes that 5 of them have completed the assignment for the subject abfa 1013 introduction to accounting. they learnt through the research that they did, that the accounting statement is not only done for taxation but prepared for business owners or shareholders to make an economic decision in different situations.
1798 wordsRead More - Coca-Colanarrative essayThe statement of cash flows reports a firm’s major cash inflows and outflows for a period. This statement provides useful information about a company’s ability to generate cash from operations, maintain and expand its operating capacity, meeting its financial obligations, and pay dividends. There are three types of activities to look at in this statement, which are cash flows from operating activities, investing activities, and financial activities (3, 2005).
In this essay, the author
- Explains that coca-cola was founded in 1886 by john pemberton, a civil war veteran and atlanta pharmacist.
- Explains the statement of cash flows, which provides useful information about a company's ability to generate cash from operations, maintain and expand its operating capacity, meet its financial obligations, and pay dividends.
- Explains that coca-cola's statement of cash flow shows a steady increase in operating activities within the past few years, which affects the net income.
- Explains that cash flows from investing activities affect investments in non-current assets, such as bottling companies, purchases of property, plant and equipment, and investments and assets.
- Explains the cash flow from financing activities, which affect the equity and debt of the business. there has been a steady increase in this section from $2.8 million to $3.6 million from 2001 to 2003.
- Analyzes coca-cola's consolidated balance sheet by comparing its assets, liabilities, and owner’s equity between different years.
- Explains how the horizontal analysis compares the amount of each item on the most recent statement with an earlier statement. total assets at the end of year 2003 were $2936m (10.7%), plus total liabilities increased by $646 million (4.9%) and shareholders’ equity increased $2290 million (16.3%).
- Explains that 70% of coca-cola's income comes from outside the u.s. the company produces nearly 400 brands in over 200 different countries.
- Explains that coca-cola has its share of goodwill assets and other intangible assets. impairment assessments are performed using cash flow analyses, estimates of sales proceeds, and independent appraisals.
- Explains that coca-cola has a very strong financial standing all around the world, providing abundant jobs to over 200 countries, offering over 400 products, and increasing profits.
- Describes the company's comparative balance sheet for 2003 and 2002.
- Describes the percentages of 's contributions.
- Describes the various types of investments and other assets.
- Describes the property, plant, & equipment in question.
- Describes the intangible assets of the company.
- Describes the total assets of the company.
- Describes the current liabilities of the company.
- Describes the total liabilities of the company.
- Describes the shares owned by shareowners' equity.
- Describes the retained earnings (retained earnings).
- Describes the total shareholders' equity.
- Describes the company's liabilities and shareholders' equity.
- Describes the number of millions of people in the united states.
- Describes the various types of investments and other assets.
- Describes property, plant, & equipment.
- Describes the intangible assets of .
- Describes the total assets of the company.
- Describes the current liabilities and the long-term & other liabilities.
- Describes the total liabilities of the company.
- Explains that shareholders’ equity shares are.25 par.
- Describes the retained earnings (retained earnings).
- Describes the total shareholders’ equity.
- Describes the total liabilities and shareholder’s equity for the year ended december 31, 2003.
- Describes the reported net income before cumulative effect of accounting change.
- Describes the trademarks amortization and its benefits.
- Describes bottlers' franchise rights amortization.
- Describes the benefits of goodwill amortization.
- Explains the equity method investees’ intangibles amortization.
- Describes the adjusted net income before cumulative effect of accounting change.
- Describes the reported net income for the year.
- Describes the trademarks amortization and its benefits.
- Describes bottlers' franchise rights amortization.
- Describes the factors that affect goodwill amortization.
- Describes other indefinite-lived intangible amortization.
- Explains the equity method investees’ intangibles amortization.
- Describes the adjusted basic and diluted net income per share before accounting change.
- Describes the sources of information on accounting in the united states: south-western.
1545 wordsRead More