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The balance sheet, which summarizes what a firm owns and owes at a
point in time.
The income statement, which reports on how much a firm earned in
Another name for the balance sheet is the statement of financial position.
Creditors and interested stock investors use the balance sheet to determine
a company's financial standing because it lists what a company owns and
what it owes. The balance sheet contains summarized information on a
company's assets -- the things that it owns and its liabilities -- the debts it
has. When you subtract the company's liabilities from the assets, what is left
is called stockholder's equity, the amount that is held by the company's
owners or stockholders.
Objective of income statement
Income Statement provides the basis for measuring performance of an entity
over the course of an accounting period.
Performance can be assessed from the income statement in terms of the
following:
Change in gross profit margin, operating profit margin and net profit
margin over the period
Increase or decrease in net profit, operating profit and gross profit over
the period
Comparison of the entity's profitability with other organizations
operating in similar industries or sectors.
Cash flow
The statement of cash flows reports the cash receipts, cash payments,
and the net change in cash resulting from the operating, investing, and
financing activities of a company during the period. The information in a
statement of cash flows should help investors, creditors, and others assess:
The reasons for the difference between net income and net
cash provided (used) by operating activities. Many financial
statement users investigate the reasons for the difference between net
income and cash provided by operating activities and then they can
assess for themselves the reliability of the income numbers.
Retained earnings
Retained Earnings is a balance sheet account that refers to the portion of
company income that is retained by the firm. In other words it is a part of
earnings that is not paid out as dividends or otherwise distributed to owners.
Retained Earnings are calculated by adding net income to last period
retained earnings and subtracting any dividends paid to owners.
Purposes
SUMMARY