Question

be original and use your own words

Our topic this week is Understanding a Firm's Financial Statements.

What are the top 3 things you would look at in your financial statements to see if your business is successful and why?

Answer 1

The financial statement depicts the financial performance if the company. It is similar to the scorecard of the firm.

It indicates the sales and expenses of the company. The sales of the company mean the company's goods or services provided to the customers in a financial year. The financial year is one year of the company. It starts on April 1 and ends on March 31. The statement also mentions the revenue or gains of an enterprise.

Some notable expenses are salaries or wages, depreciation cost, interest, capital, and losses. The accountants and many analysts have also called financial statements as income statements because it indicates all the incomes and expenses separately. The statements also follow the balance sheet of the company.

The financial statements include three critical factors or statements: balance sheet, income statements, and cash flow statement.

To understand the success or failure of a company, the managers should consider these three statements. The balance sheet mentions the assets and liabilities of the company. Assets are the benefits of the company, such as furniture or machinery. On the other hand, liabilities are the debts of loans that the company is owing to the internal or external debtors. The assets of a company should provide profits and gains for the success of the company. The income statement shows the incomes and expenses often the company. It states the condition of yeh company.

The company determines the losses or gains of the company. It also determines the success of the enterprise. The last factor is the cash flow statement.

The statement shows the liquidity in the transactions of the enterprise.

The statement mentions the net earnings of the company. Hence, it also determines the success of the company.