Importance Of Financial Statements

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Recommended: Objectives of financial statements and the concepts underlying their preparation

Introduction Financial statements are very important to a company because they measure a company’s performance. This performance statement can be viewed by the owners, possible investors, and lenders. This statement can make or break a company and is important that it is completed correctly. A Financial statement includes income statement, balance sheet, and statement of cash flows. In this essay I will describes the reason of the firm’s financial statements. Income Statement Purpose The income statement is the one of the most important and a large part if the financial statement. The income statement features the expenses, revenue, and either a profit or loss from the company during the fiscal month, year, quarter. One of the main purposes …show more content…

They are liquidity, profitability, and efficiency. Liquidity is ratio of assets to liabilities. This shows a company 's capability of paying their short term bills. The second is profitability and it shows the owners ability to exchange sales into profits. The last is efficiency and it includes inventory turnover and receivables turnover. Conclusion In conclusion a financial statement is very important to a firm to measure performance. A Financial statement includes income statement, balance sheet, and statement of cash flows. When reviewing a firm’s financial statement, a company uses three categories of ratios for the analysis of this finance statement and they are liquidity, profitability, and efficiency. In this essay I described the reason of the firm’s financial statements and why it is a very important to a …show more content…

Four Basic Types of Financial Ratios Used to Measure a Company’s Performance. Retrieved September 5, 2015 Kimball, T (n.d). The Three Parts of a Cash Flow Statement. Retrieved September 5, 2015 Lermark, H. (2003). Steps to a basic company financial analysis. Retrieved September 5, 2015. Meleicher, R., &Norton, E. (2015). Indroduction to Finance: Markets, investment, and financial management (Fifthteenth ed.). Russel, P. (2003). Financial Statement Analysis. Retrieved September 5,

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