Understanding Financial Statements
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The paper explores the four basic parts of financial statements; the income statement, the balance sheet, the statement of cash flow and footnotes and disclosures. The paper details the role and utility of each section of the financial statement and explains how they shed light on a business' true economic standing. The paper notes the importance of businesses checking their financial statements to find tendencies and irregularities, and then following these up with more examination.
From the Paper:"A balance sheet is a financial statement that sums up a business's assets, liabilities and shareholders' equity at a precise moment. These three balance sheet parts give investors a proposal as to what the business owns and owes, as well as the quantity put in by the shareholders (Balance Sheet, 2010). A balance sheet supplies comprehensive information about a business's assets, liabilities and shareholders' equity (Beginners Guide to Financial Statements, 2007). The Balance Sheet is a statement featuring what a business owns or their assets and claims against the business or their liabilities and owners' equity at a particular point in time. A number of experts liken the balance sheet to a picture showing a business's financial wellbeing. It is helpful to bear in mind the left to right accounting equation orientation. This means that assets are on the left side and claims are on the right. Additionally, there are quite a few other traits of the balance sheet that are notable, such as balancing, order of listing, valuing of items, and definitions of items (Understanding Financial Statements, 1999).
"Things on a balance sheet are listed in order of liquidity. Liquidity means something slightly different for assets and for claims on assets. In regards to assets, liquidity means proximity to cash. Because of this cash is the first thing that is listed on the balance sheet. After cash, the remaining current assets are listed in order of liquidity."
Sample of Sources Used:
- Balance Sheet. (2010). Retrieved November 26, 2010, from Investopedia Web site: http://www.investopedia.com/terms/b/balancesheet.asp
- Beginners Guide to Financial Statements. (2007). Retrieved November 26, 2010, from U.S. Securities and Exchange Commission Web site: http://www.sec.gov/investor/pubs/begfinstmtguide.htm
- Cash Flow Statement. (2010). Retrieved November 26, 2010, from Investopedia Web site: http://www.investopedia.com/articles/04/033104.asp
- Footnotes: Start Reading the Fine Print. (2010). Retrieved November 26, 2010, from Investopedia Web site: http://www.investopedia.com/articles/02/050102.asp
- Income Statement. (2010). Retrieved November 26, 2010, from Invesoptedia Web site: http://www.investopedia.com/terms/i/incomestatement.asp
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