Question

You are evaluating your company's recent operating performance and are trying to decide on the relative weights you should put on the income statement, balance sheet, and the statement of cash flows. Discuss the information each of these statements provides and its role in evaluating performance.

Answer 1

If we focus on operating performance of the organization our concern would be operating performance of the company and this can be judged by studying the income statement of the company which provide the information related to operating financial performance like gross profit, operating profit, net income and earning per share which reveals the information related to operating performance. Apart from this information related to organization expenses and their nature also provided by the income statement.

Balance sheet provides the information related to assets and liabilities and owners capital on a particular date. it also provide the information related to nature of assets and liabiliites whether assets and liabilities are operating assets, short term assets and long term.

Cash flow statement provides information related to change in cash position related to operating activities, investing activities and financing activities. cash flow from operating activities provides information related to cash inflow and outflow from operating activities.