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A balance sheet is split into three parts; assets, liabilities and stockholder’s equity. Assets are the economic resources possessed by a firm. Liabilities are a firm’s debt or obligations to acquire its assets. Stockholder’s equity is the total value of a firm’s common stock in addition to the additional paid-in capital and retained earnings. A basic rule of finance is that all business transactions are documented on the balance sheet at the dollar value actually decided at the time of the transaction. This suggests that, recording all of the firm’s transactions at their historic cost is the factor that the net worth of the firm illustrated on the balance sheet should not be mixed with the sales or appraised value. Net worth or stock holder’s equity on the balance sheet simply shows the difference between assets and liabilities (Bernstein & Wild, 2000).
Income statement, which is also known as the profit and loss statement, statement of operations or statement of income, is another major financial statement. Income statement summarizes the firm’s revenues and expenses over a specified time, concluding with the net income or loss for the period. The income statement is divided into three parts; revenue, expenses and the net income. Revenue is cash inflows or acquiring of assets of a firm during a specified period. Expenses are the outflow or using of the assets, or incurrence if liabilities during a specified period. Net income on an income statement is the total sum earned or lost by the firm during the accounting period. Using the accrual method of accounting, sales are documented on the income statement when the goods and/or services associated with those sales are delivered or shipped to the customer. The cost of goods sold is recorded on the income statement at the same time the sales are recorded. Sales and cost of goods sold are also recorded in spite of of when the firm gets cash for the goods delivered
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“UNDERSTANDING FINANCIAL STATEMENTS Research Paper”, n.d. https://studentshare.org/miscellaneous/1559985-understanding-financial-statements.
PricewaterhouseCoopers LLP is the auditor of the Bank of America. PricewaterhouseCoopers LLP (PwC) is the firm’s registered public accounting firm and they conduct the audit of the business. The auditors (PwC) are recognized worldwide and are very popular in the auditing department.
There are those transactions that are initiated by the organization towards other stakeholders to that organization, while others are initiated by the stakeholders’ towards the organization. Either way, the transactions entails either bringing some money to the organization, or taking away some money from the organization, for the purpose of paying up some expenditure it has incurred.
This financial statement allows analysis between different companies or time periods within a company to be done easily. The figures on the common size account are conveyed as percentages of a statement component like the returns. While most organizations do not report their statements in joint size, it is beneficial to calculate if you aim to evaluate two or more firms of differing dimensions against each other.
Consolidation of Financial Statements Introduction The acquisition method is predominantly applied to consolidation of financial statement from 2009. Prior to that Purchase Method of consolidation was in vogue. Pooling of interest method was adopted for consolidation prior to 2002.
These companies have provided their owners with adequate returns, with Coles-Myers' ROE playing around 15-19% within the period, while Woolworths's ROE in 2005 is 37%, 32% in 2006 and 27% in 2007. These high ROE figures are effect of financial leverage that are employed by both companies: both companies utilize debt in more than 50% of their financing.
The balance sheet informs the company's stakeholders how much its resources is and how it is financed. As such, it shows the claims of creditors and stockholders on the company's assets (Fraser and Ormiston 2004).
Sainsbury Plc. This report will start by giving a brief background of the two organizations in terms of their financial approaches. The analysis and benchmarking of their financial ratios will follow. This paper concludes with a recommendation for Tesco Plc to improve its liquidity.
The additional information if included in the main report would cloud the data in it and hence decrease the efficiency of the report. But the same additional information in the form of footnotes can lead to better clarity and understanding of the financial statement
Financial ratios are tools that help to interpret a company’s financial planning, and its performance during the existence of the business. It allows the company to compare own activities with respect to previous years as well as among
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