Financial Statement
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Financial Statement
Edward McClendon
ACC/290
April 5, 2012
Edward Hastings
Financial Statement
In accounting information are assets, liabilities, expenses, and revenues. This information is needed to determine if a company is a good investment venture to money or if banks want to give financial support to assist with the growth and profit of a company. When it comes to financial statements there are four main types used in companies which are income statements, retained earnings statements, balance sheets, and statement of cash flow. These statements provide detailed information about the revenues, expenses, dividends, assets, and liabilities.
The financial statement that shows revenue and expenses for a period of time with a positive or negative profit is the income statement. This statement can allow those who want to become investors to view past net income of the company. Investors can use these numbers to determine if it is worth investing money in a company that has positive growth. A company that shows negative growth will deter those who want to invest because they want to see a positive return on their investment in the company. Banks use the financial statement to predict if the company will be able to repay the money lent (Kimmel, Weygandt, & Kieso, 2011). The period of time used for the financial statement is the same period of time used to determine the companys retained earnings.
Retained earnings statements present the amounts and causes of changes in retained earnings during the period (Kimmel, Weygandt, & Kieso, 2011). A company that shows a profit at the end of each time period should make a decision regarding whether or not the company will pay a portion of the profit to the shareholders in dividends. This decision is based on if the company wants to use the profit to pay the shareholders in dividends or use the profit to expand the company. Investors view the retained earnings statements to see if the company pays the dividends or uses the profit to invest back in the company. Lenders also observe the companys retained earnings statements to see how much money the company pays in dividends. ds.
Assets and claims to assets at a specific point in time are reported on the balance sheet (Kimmel, Weygandt, & Kieso, 2011). A balance sheet provides information about assets and liabilities. Creditors will evaluate the balance sheets to determine the companys capabilities to repay their loans. The satisfactory proportion of debt and common stock financing is determined on the balance sheet and evaluates the relationship between debt and stockholders equity (Kimmel, Weygandt, & Kieso,