StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Describe key financial statements, including balance sheets and cash flow statements - Essay Example

Comments (0) Cite this document
Summary
A balance sheet gives information on the business’ ability to pay bills on time; its capacity to give dividends to the owners, and its financial flexibility to acquire money. A balance sheet displays the shareholder’s equity, liabilities, and assets of the business. In…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.1% of users find it useful
Describe key financial statements, including balance sheets and cash flow statements
Read TextPreview

Extract of sample "Describe key financial statements, including balance sheets and cash flow statements"

Key Financial ments       Key Financial ments  Balance Sheet A balance sheet gives information on the business’ ability to pay bills on time; its capacity to give dividends to the owners, and its financial flexibility to acquire money. A balance sheet displays the shareholder’s equity, liabilities, and assets of the business. In addition, data on a balance sheet can be employed to calculate vital signs that highlight the structure of a business and its capacity to meet its responsibilities (Longenecker, Petty, Palich, & Hoy, 2012). These may comprise quick ratio, working capital, or current ratio.
Income Statement
An income statement gives information on business profitability and earnings. The income statement is usually valid for a period that is specific. This may be a month or a year. Nonetheless, income statements are indispensable. This is because they permit the owners of a business to evaluate the business results over a period and to know the outcomes of other businesses for a similar period (Longenecker, Petty, Palich & Hoy, 2012).
Cash Flow Statement
A cash flow statement illustrates the flow of money out and in a business. The cash flow statement depicts both the accompanying alterations and the current results of operation in the balance sheet. A cash flow statement is helpful in ascertaining the viability of a business that is short-term, most importantly, its capacity to pay costs. Moreover, a cash flow statement highlights the true cash flow paid and received by the business. A cash flow statement highlights the flows of cash from operations, that is, the staff and suppliers’ payments, and money received from clients (Longenecker, Petty, Palich & Hoy, 2012). Also, it shows cash flows from investing activities and financing activities.
Question 1
Cash and cash equivalents
Cash equivalents are assets that can be willingly converted to money, for example, commercial papers, treasury bills, money market, or marketable securities. Moreover, cash equivalents have an existence that is short-term. Cash equivalents mature within a period of 3 months. A cash equivalent investment should have a change in value that has insignificant risk (Graham, Zweig, & Buffett, 2003).
Accounts receivable
Accounts receivable is cash owed to a business by customers and the balance sheet depicts it as an asset. It deals with the billing of a client for services and goods ordered by the client. In addition, accounts receivable epitomizes cash owed by persons to the business on services or products sales on credit (Graham, Zweig, & Buffett, 2003).
Inventory
An inventory is a list of materials and goods that are stocked by the business. Inventories are mainly materials and goods for sale by the business. Nonetheless, a business may store inventories that it does not intend to sale to clients (Graham, Zweig, & Buffett, 2003).
Question 2
Current Liabilities
They are short-time financial requirements that are paid in a year. Current liabilities may comprise expenses like interest payments that are not paid, taxes, and wages, advance collected revenues for services or goods delivered, cash dividends, accounts payable, and short-term notes.
Long-term Liabilities
They are liabilities that are not paid in an operating cycle of a business or within a year. These liabilities entail large amounts of money that may be used to buy assets that are significant, replace assets, or expand the business.
Contingent Liabilities
They occur when a business suffers a probable liability for a transaction or an event, but it is not sure if it will result to its financial drain. Contingent liabilities often occur when the business is facing legal issues.
Question 3
Current ratio measures business payables and debt, and its receivables, inventory, and cash. It is a measure of a business capacity to accomplish its short-term requirements. Current ratio is calculated through a division of total current assets with total current liabilities (Arthur & Sheffrin, 2003). 
References
Arthur, S., & Sheffrin, S. M. (2003). Economics: Principles in action. New Jersey: Pearson Prentice Hall.
Graham, B., Zweig, J., & Buffett, W. E. (2003).The intelligent investor: The definitive book on value investing. New York: Collins Business.
Longenecker, J. G., Petty, J. W., Palich, L. E., & Hoy, F. (2012). Small business management: Launching and growing entrepreneurial ventures (16th ed.). Ohio: South-Western Cengage Learning. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Describe key financial statements, including balance sheets and cash Essay”, n.d.)
Describe key financial statements, including balance sheets and cash Essay. Retrieved from https://studentshare.org/management/1601352-describe-key-financial-statements-including-balance-sheets-and-cash-flow-statements
(Describe Key Financial Statements, Including Balance Sheets and Cash Essay)
Describe Key Financial Statements, Including Balance Sheets and Cash Essay. https://studentshare.org/management/1601352-describe-key-financial-statements-including-balance-sheets-and-cash-flow-statements.
“Describe Key Financial Statements, Including Balance Sheets and Cash Essay”, n.d. https://studentshare.org/management/1601352-describe-key-financial-statements-including-balance-sheets-and-cash-flow-statements.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Describe key financial statements, including balance sheets and cash flow statements

Financial statements

.... The financial statements of a company are a set of reports that provide information about the financial condition of a company. The four major financial statements are the income statement, balance sheet, statement of cash flow and the statement of retained earnings. The income statement provides information regarding the profitability of a company. The statement is divided into two parts. The top part shows the revenues of the company, while the bottom portion illustrated the expenses of the...
3 Pages(750 words)Essay

Cash Flows Analysis and Financial Statements

...?Cash flow analysis and financial ments Question A company’s financial information is usually utilized by various people and who are impacted directly or indirectly by this information. Some of the main users of this kind of information include the management, employees, creditors, potential investors, suppliers and customers. All these users are interested in different areas of the information and utilize the information differently. The customers are interested in the company’s financial position since they want to be assured of continuous supply of goods and services. The employees of ProTek Company would be interested in the...
4 Pages(1000 words)Assignment

Financial Statements

...on the fair presentation of the publicly listed companies who offer their stocks to the general public. The SEC monitors and punishes companies that do not comply with SEC’s business policies (Wild, Shaw, Chiappetta, 2011). • Annual report; and The annual report is composed to three financial statements. The balance sheet shows the assets, liabilities, and capital of the business. The income statement shows the revenues, cost of revenues, operating expenses, net income or net loss amounts. The statement of cash flows shows the sources of cash inflows and the sources of...
4 Pages(1000 words)Essay

Statements of cash flows

...( AICPA). Other investment activities classifications includes cash gotten from securities like forward, option, future or swap contracts and they should appear on the cash flow statements. It only excludes these securities when the accounts are held for dealing and as a result, the payments are classified in part of financial undertakings. Noting here that, the account may be accounted as a hedge it is therefore classified in this section of the cash flow. In the operation activities just like in IFRS cash flow method, are various methods that are...
7 Pages(1750 words)Research Paper

Financial statements

.... Thus, the balance sheets and the cash flow statements are applied towards adjusting the income statement, in terms of including the indirect financial concepts of appreciation, depreciation or goodwill, to ensure the final financial records show the true worth of the organization (Penner, 2004). Thus, both the balance sheets and the cash flow cause the adjustment of the income statement for depreciation, appreciation and goodwill inclusion. Finally, the major aspect that differentiates the three financial records is that; each of them provides the decision makers with some specific information that is not present in the other records. This way, the three financial records become unique in their own ways. The specific information... ?...
4 Pages(1000 words)Research Paper

Financial Statements

..., not when the money changes hands. Sales can be recorded even though payment may not be due for several months. The accountant's personal judgment that adheres to the concepts and conventions of accounting can help assure that the financial statement will present a true and fair view of a business's activities. The financial statement is made up of several key components. They usually include a balance sheet, a profit and loss account, a cash flow statement, and an equity statement. They will also include complex...
4 Pages(1000 words)Essay

Financial Statements

...I. Essential financial information on the management of the enterprise The memo to the board will inform them that basic financial information will be submitted through the four financial statements that include income statement, balance sheet, statement of stockholders’ equity, and cash flow statement. The financial statements will provide the overall performance of the company, and where financial ratios can be derived and computed to analyze company performance. The introduction of the new spark plug manufacturing process in the Unites States, which is said to be very successful, will be confirmed and validated by the financial statements to be presented. While the financial statements will provide the overall financial health... of the...
8 Pages(2000 words)Essay

Financial Statements

...Company Google Source: http finance.yahoo.com/q/is?s=GOOG+Income ment&annual I. Gross profit margin Formula: gross profit total profit = gross profit margin expressed in percentage Year 2010 (number in thousands) Gross profit: 18,904,000 Total Profit: 29,321,000 18,904,000/29,321,000=.64 Gross profit margin : 64% Year 2011 Gross profit: 24,717,000 Total profit: 37,905,000 24,717,000/37,905,000 = .65 Gross profit margin: 65% Year 2012 Gross profit: 29,541,000  Total Profit: 50,175,000   29,541,000 / 50,175,000  = .588 Gross profit margin = 58% II. Operating income margin Formula: operating income/revenue Year 2010 (number in thousands) Operating income: 10,381,000   Revenue: 29,321,000  10,381,000  / 29,321,000 = .35 Operating... Google...
2 Pages(500 words)Essay

Assess the Components of Cash Flow Statements

...method derives the data from the income statement and from changes on the balance sheet from one period to the next. The income statement and the balance sheet are based on the accrual accounting. It is a partial communication of accumulation basis gains to cash basis gains. 3. Different components of the cash flow statement employ indirect method. For instance we arrive at net cash flow from operating activities indirectly by starting with reported net income and working backwards to convert that amount to a cash basis....
3 Pages(750 words)Research Paper

Financial statements

.... They have the duty of recording, analyzing, summarizing and reporting the financial performance and position of the company to both internal and external users of financial statements. Being sales department personnel, I work on generating invoices for the customers, sales tax return and other documentation in collaboration with accounts and finance department of the company. Information used in financial statements The financial statements of my organization provide various sorts of financial information. Fundamentally, it shows the financial position of my organization through...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Describe key financial statements, including balance sheets and cash flow statements for FREE!

Contact Us