Financial Statements

Axia College

University of Phoenix

      This report will explain various financial pieces that a company would utilize in order to make intelligent successful financials decisions. We will explore assets, balance sheets as well as other financial statements, liabilities and shareholders equity and how each component is used individually and comparatively. Finally, we will determine what types of decisions a company might use this information for.

      A company might purchase assets in order to increase its value. An asset is a company owned resource that has expected economic value. Assets can be short or long-term. Long-term assets are called fixed assets and short-term assets are called currents assets. The difference is that current assets may be used in a year’s time and fixed assets are progressive and continue generating cash flow for more than a year. Fixed assets could be real estate or a company’s equipment.

      A company’s balance sheet is an extremely important set of financial information. A company’s balance sheet reports how much the company owns and how much the company owes in a particular period. A company has expenses and may have to borrow money which would be considered a company’s liabilities. A company may have to get it from shareholders equity. An income statement reports the company’s revenue what the amount of profit that the company has been able to generate within a particular timeframe. A cash flow statement illustrates cash outflow and inflow over a specific time. Together the balance sheet, cash flow statement and income statement give a total overview of the company’s financials.

      A company uses comparative statements to determine the company’s financial situation at the end of an accounting period. (Introduction to Financial Statements, 2005)
      Liabilities are considered anything that a company owes financially regarding legal debts or other financial obligations that have...