Financial statements

Examples of Financial statements in the following topics:

• Financial Statements Across Periods

  • Companies prepare three financial statements according to GAAP rules: the income statement, the balance sheet, and the cash flow statement.
  • Financial statements are records that outline the financial activities of a business, individual, or any other entity .
  • Companies generally submit three forms of financial statements.
  • These three financial statements are:
  • The period represented in a given financial statement can vary.

• Comparisons Within an Industry

  • Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions.
  • Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization.
  • Financial statements can reveal much more information when comparisons are made with previous statements, rather than when considered individually.
  • Moreover, it is often useful to compare the financial statements of companies in related industries.
  • Vertical analysis, which is a proportional analysis of financial statements, lists each line item in the financial statement as the percentage of another line time.

• Financial Accounting

  • Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as:
  • In addition, financial accounting records and financial statements are essential sources of information for the preparation of tax returns.
  • Independent auditors of an organization's financial statements must provide written assurance in their report that such statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP).
  • According to their website, their mission "is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements" (IASB 2009).
  • Finally, when your business reaches the point where you need to issue financial statements to external stakeholders, (e.g. banks, stockholders, regulatory agencies, etc.), your accountant will need to be familiar with and, ideally a member of, the national association of accountants in your country.

• Sample Evaluation

  • Most of the ratios discussed can be calculated using information found in the three main financial statements.
  • Consider the company Bounded Inc., a magazine publisher, to illustrate the financials of a company.
  • The following information is based on the company's FY (financial year) 2011 performance:
  • Using the information above, we can compile the balance sheet and the income statement.
  • We can also calculate some financial ratios to determine the company's financial situation.

• Why an accounting system is important

  • "Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders.
  • In addition, financial accounting records and financial statements are essential sources of information for the preparation of tax returns.
  • Independent auditors of an organization's financial statements must provide written assurance in their report that such statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP).
  • According to their website, their mission "is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements" (IASB 2009).
  • Finally, when your business reaches the point where you need to issue financial statements to external stakeholders, (e.g. banks, stockholders, regulatory agencies, etc. ), your accountant will need to be familiar with and, ideally a member of, the national association of accountants in your country.

• Basic financial statements

  • The Balance Sheet will show you the financial condition of your business, what you own, what you owe, and the owners' financial interest.
  • You will sometimes hear the Income Statement referred to as the Profit and Loss Statement and the Balance Sheet called the Statement of Financial Condition.
  • This is, of course, a relatively simple example to illustrate the general outline of an Income Statement, but it should give you an appreciation of why the Income Statement is important to the owner of any business.
  • You can also see why it is sometimes called a statement of financial position.
  • It shows the condition of the business, in financial terms, as of a specific date.

• The Role of Financial Managers

  • Financial managers are responsible for the financial health of an organization.
  • Financial managers typically:
  • Controllers direct the preparation of financial reports that summarize and forecast the organization's financial position, such as income statements, balance sheets, and analyses of future earnings or expenses.
  • In preparing and analyzing reports such as balance sheets and income statements, financial managers must pay attention to detail.
  • This is an example of a financial statement that financial managers are responsible for preparing and interpreting.

• The Imperative of Liquidity

  • Since cash flows are vital to a company's financial health, the statement of cash flows provides useful information to many stakeholders.
  • Another purpose of this statement is to report on the entity's investing and financing activities for the period.
  • Since cash flows are vital to a company's financial health, the statement of cash flows provides useful information to management, investors, creditors, and other interested parties.
  • Effects on an enterprise's financial position of both its cash and non-cash investing and financing transactions during the period (disclosed in a separate schedule).
  • Cash flow statements allow businesses to track their profits and and expenses to balance their accounts.

• Defining the Income Statement

  • The income statement indicates how revenues were transformed into the net income or net loss during the period reported.
  • Businesses and other organizations periodically produce financial statements, i.e. formal structures for conveying financial information to decision makers.
  • Financial accounting focuses on providing useful information about an organization, and both of these figures will help decision makers begin to glimpse a portrait of the underlying business.
  • An income statement also reports gains and losses for the same period of time.
  • The important thing to remember about an income statement is that it represents a period of time.

• The Business Plan

  • A business plan is a formal statement of a set of goals, the reasons they are believed attainable, and the plan for reaching those goals.
  • Elements of a Business Plan: Cover sheet, Executive summary (statement of the business purpose), Table of contents, Body of the document, Business Description of business, Marketing Competition, Operating procedures, Personnel Business insurance, Financial data, Loan applications, Capital equipment and supply list, Balance sheet Break-even analysis, Profit and loss statements, Three-year summary, Detail by month -- first year, Detail by quarters -- second and third year, Assumptions upon which projections were based, Pro-forma cash flow, Supporting documents, Tax returns of principals (partners in the business) for last three years, Personal financial statements (all banks have these forms), Copy of franchise contract and all supporting documents provided by the franchisor (for franchise businesses), Copy of proposed lease or purchase agreement for building space, Copy of licenses and other legal documents, Copy of resumes of all principals, Copies of letters of intent from suppliers, etc.
  • A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals.
  • The key elements of a business plan include a comprehensive presentation of relevant information, from market analysis to company financials.
  • Financial Projections: The financials provide information on the proposed spending and revenues of the company, typically for the first 3 to 5 years of operation.