Financial Statements

Financial Statements Paper

Abstract

In this paper I will identify the four basic financial statements, discuss how they are interrelated with each other, and why they are useful to managers, investors, creditors, and employees.

BALANCE SHEET

A balance sheet provides detailed information about a company's assets, liabilities and shareholders' equity.

Assets are things that a company owns that have value. This usually means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. Assets also include things that can't be touched but nonetheless exist and have value, such as trademarks and patents. Cash itself is an asset, as well as investments that a company makes.

Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, such as for materials, payroll a company owes to its employees, environmental cleanup costs, or taxes owed to the government. Liabilities also include obligations to provide goods or services to customers in the future.

Shareholders' equity is sometimes called capital or net worth. It's the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.

A balance sheet shows a snapshot of a company's assets, liabilities and shareholders' equity at the end of the reporting period. It does not show the flows into and out of the accounts during the period.

INCOME STATEMENT

An income statement, otherwise known as a profit and loss statement, is a summary of a company's profit or loss during any one given period of time, such as a month, three months, or one year. The income statement records all revenues for a business during this given period, as well as the operating...

money borrowed from a bank to launch a new product, rent for use of a building, money owed to suppliers