Financial Statements Essay Example | Topics and Well Written Essays - 2000 words

Financial Statements - Essay ExampleWhile the financial statements allow for provide the overall financial health of the company, SAC board will also be warned of relying solely on the financial statements as the basis for their future decisions. The memo will contain a list of inherent weaknesses that financial statements have in them.a. Income statement - The income statement describes the companys revenues and expenses along with the resulting net profit or loss over a period of time. Revenues argon those that the company earned through the sale of products or services to customers, or any other(a) remains of income that accrues to the company due to its business activities. On the other hand, expenses atomic number 18 those resources that the company has to spend to produce the revenues. The net result is either a net income or a net loss. If revenues exceed expenses, it is a net income. If expenses exceed revenues, it is a net loss. These information are all reflected in th e income statement of the company.b. Balance ragtime The balance sheet is a financial statement that describes the companys financial position at a given time. Its three main components are the assets group, the liabilities group, and the owners equity section. The assets are the resources of the company that are being used to produce the goods and services the company sells to its customers. The liabilities and the owners equity, on the other hand, are the means by which assets are financed and acquired for the company. Liabilities are what the company owes its creditors, while equity is what the company owes its owners or stockholders. A companys total assets are equal to all its liabilities and owners equity.c. Statement of owners equity The statement of owners equity is also known as the statement of retained earnings. (Internet Center for Management and Business Administration, Inc., 2010) This statement shows changes in the owners equity, resulting from the operations