Financial Statement

Financial Statement Paper

Orlando Joseph

December 5, 2012

Mary Heslinga

Maintaining an understanding of your financial statements can keep you aware of changes within your company at all times. Your financial statements consist of four parts, income statement, retained earnings statement, balance sheet, and statement of cash flows. Using this will allow you to keep ahead of any abrupt changes. Also allowing you to have an understanding of how your company is doing and what more needs to be done to be successful. This gives you opportunity to keep a closer eye on the financial growth of your company, while also paying attention to the profitability of your business.

The four financial statements consist of income statement, retained earnings statement, balancing sheet, and the statement of cash flows. These tools allow from your business to perform at the best optimal performance, however they can also help catch your company when it begins to fall from its standing. The first of the four, which is income statements help to gain an understanding if your company is bringing in a profit. This is discovered by working the calculation of revenue and expenses. The concept is actual very easy to understand, if your company is receiving more revenue than the expenses that must be paid you are making a profit. However if you are spending more money to stay open then you are making your company is not making a profit. The whole reason that you own a business is to turn your service into a net gain. This is what determines the success or failure of this company.

The next financial statement is the retained earnings statement. This tool is used to determine the policies for dividends and the growth of the company. This focuses on how much dividends the company had to pay out at the end of the year. If you are a strong company with a solid following you would offer dividends to sweeten the investment, providing quarterly payout .However if you are a company that is not strong, and is in desperate need for growth the option to have dividends most likely it is not one to use, or maybe not paying a high dividend is the better option.

The Third financial statement which is a balance sheet is used to bring to light what the companies' dependency is on. This takes the two types of claims and puts them in one of two groups. The categories that they fall into are either liability, stockholders equity. This is when you see whether your company is depending on its creditors or is stockholder for financing. The proper choice is when you have to depend on your stockholders.

The final financial statement is the statement of cash flow. This statement is used to determine whether the cash that is being used for operation, investing, and financing is sufficient