Financial Statements Essay

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There are four basis financial statements that are very important that are used by companies to determine their short and long financial position. They are considered the back bone of financial accounting. The balance sheet shows the total assets of a business. It is specifically for a certain period of time. The equation for the balance is that the total assets equal liabilities plus the owner’s equity. It will show you a detailed look at the finances showing one section with net worth and the other showing liabilities. Both sections should balance in the end. The income statement will tell you whether or not the business is successful. It shows the net income of the business after expenses are paid and shows the profits and the loss. It also represents a period time and is associated with the balance statement. The income statement will show potential investors whether the business made or loss money during a particular period.
The cash flow statement shows how well the finances are being managed. The statement of cash flows reports the cash effects of a business’s operation, investing and financing activities. (Kimmel, Weygandt, & Kieso, 2011,). It is a breakdown of what is coming in and what is going out of the business and shows if the business is financially sound.
The Equity statement shows the equity of shareholders and owners at the end of a financial period. It will show how they got to the balance and how it changed from one period to the next.
The financial statement is very useful to employees by providing them with a sense of job security if it is showing that the business if profitable. The majority of businesses will post their financial statement for existing and potential employees

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