Question

In own definition, define and explain the importance of each of the following financial statements to a publicly traded corporation and to an investor:

Income Statement

Balance Sheet

Cash Flow Statement

Statement of Retained Earnings

Answer 1

1 income statement

An income statement is an important financial statement as it shows the overall profitability of a company. You can also use the income statement to analyze how efficiently your business is able to translate expenses into revenues for the procpectus of the company

Investors use income statements to determine the profitability of a company over time. You can also look for trends in company spending and earnings because the statement breaks down individual revenue and expenses. ... Another important feature for investors is the information on earnings per share (EPS).

2 Balance Sheet

The balance sheet provides a snapshot of a company's assets, liabilities, and equity at the end of an accounting period. These three categories allow business owners and investors to evaluate the overall health of the business, as well as its liquidity, or how easily its assets can be turned into cash.

The purpose of a balance sheet is to give interested parties an idea of the company's financial position, in addition to displaying what the company owns and owes. It is important that all investors know how to use, analyze and read a balance sheet. A balance sheet may give insight or reason to invest in a stock.

3-

Importance of the Cash Flow Statement

Enables investors to use the information about historic cash flows of a company for projections of future cash flows on which to base their investment decisions. Shows the changes in the balance sheet, and helps in analysing the operating, investing and financing activities.

The statement of cash flows is very important to investors because it shows how much actual cash a company has generated. The income statement, on the other hand, often includes noncash revenues or expenses, which the statement of cash flows excludes.

4

The Statement of Retained Earnings, or Statement of Owner's Equity, is an important part of your accounting process. Retained earnings represent the amount of net income or profit left in the company after dividends are paid out to stockholders. The company can then reinvest this income into the firm.

The Statement of Retained Earnings, or Statement of Owner's Equity, is an important for the investor .Retained earnings represent the amount of net income or profit left in the company after dividends are paid out to stockholders. The company can then reinvest this income into the firm.