Question

In: Accounting

What is the Importance of having financial statements in a company (eg: Balance sheet, profit and...

What is the Importance of having financial statements in a company (eg: Balance sheet, profit and loss, trial balance, and journal report).

please write it in paragraphs

Thank you

Solutions

Expert Solution

Financial statements are important because they consists of information about financial health of a company. Financial statements help companies in making decisions by identifying the area in which the company generates high ROI. By publishing financial statements, management can communicate with investors, shareholders, creditors etc.

The main financial statements are the income statement, balance sheet, cash flow statement, and statement of shareholders equity. The income statement easily tells an investor or manager how much revenue was generated and what the expenses are. The balance sheet is important for investors and managers due to it being a statement of the firm's overall health. The statement of cash flows is often overlooked, but it tells a great deal of information about a firm’s health. The statement shows the cash flow in and out of the firm which is the most crucial matter for a company. The statement of shareholders’ equity is submitted along with the firm’s balance sheet. The statements tell investors or managers how the company’s equity position has changed and the reason of the change.


Related Solutions

The following are the financial statements of Nosker Company.    Nosker Company    Comparative Balance Sheet...
The following are the financial statements of Nosker Company.    Nosker Company    Comparative Balance Sheet    December 31, Assets 2017 2016 Cash $ 38,000. $ 20,000 Accounts receivable 30,000 14,000 Inventory 27,000 20,000 Equipment 60,000 78,000 Accumulated depreciation- equipment (29,000) (24,000) Total $126,000 $108,000 Liabilities and Stockholders' Equity Accounts payable $ 24,000 $ 15,000 Income taxes payable 7,000 8,000 Bonds payable 27,000 33,000 Common stock 18,000    14,000 Retained earnings 50,000 38,000 Total $126,000. $ 108,000 NOSKER COMPANY INCOME...
Clyde’s Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend...
Clyde’s Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same relationships the past couple of years; these relationships are anticipated to hold in the future. Clyde’s has excess capacity, so there is no expected increase in capital assets. Income Statement   Sales $2,000,000   Cost of goods sold 1,260,000   Gross profit 740,000   Selling and administrative expense 400,000   Amortization 55,000   Earnings before interest and taxes 285,000   Interest 50,000   Earnings before taxes 235,000...
Translate the following various trial balance accounts into financial statements. Eg – Sort assets, current and...
Translate the following various trial balance accounts into financial statements. Eg – Sort assets, current and non-current; Liabilities, current and non-current etc. Also include notes of entries that need to be combined, e.g (Accumulated depreciation: “note x Accumulated amortisation - Software Accumulated depreciation – Buildings Accumulated depreciation – Computers Accumulated depreciation – Furniture & Accumulated depreciation – Motor vehicles Accumulated depreciation – Plant & equipment = “ All following the AASB. Company is a large childcare service. Accounts payable Accounts...
Williams Company is a manufacturer of auto parts having the following financial statements for 2016. Balance...
Williams Company is a manufacturer of auto parts having the following financial statements for 2016. Balance Sheet December 31, 2016 2016   Cash $ 280,000   Accounts receivable 170,000   Inventory 405,000      Total current assets $ 855,000   Long-lived assets 1,840,000      Total assets $ 2,695,000   Current liabilities 420,000   Long-term debt 920,000   Shareholder equity 1,355,000      Total debt and equity $ 2,695,000 Income Statement For the years ended December 31, 2016 2016   Sales $ 3,700,000   Cost of sales 2,900,000      Gross margin 800,000   Operating expenses* 520,000      Operating...
QUESTION 1 The Garvey Company has the following financial statements. Garvey Company Balance Sheet For the...
QUESTION 1 The Garvey Company has the following financial statements. Garvey Company Balance Sheet For the period ended 12/31/X1 ($000) ASSETS 12/31/X0 12/31/X1 Cash $ 3547 $ 2855 Accounts receivable 6579 5217 Inventory 2573 3220 CURRENT ASSETS $ 12699 $ 11292 Fixed assets Gross $ 22478 $ 24360 Accumulated deprec. (12017) (12927) Net $ 10461 $ 11433 TOTAL ASSETS $ 23160 $ 22725 LIABILITIES Accounts payable $ 1577 $ 1710 Accruals 233 380 CURRENT LIABILITIES $ 1810 $ 2090 Long-term...
The Garvey Company has the following financial statements. Garvey Company Balance Sheet For the period ended...
The Garvey Company has the following financial statements. Garvey Company Balance Sheet For the period ended 12/31/X1 ($000) ASSETS 12/31/X0 12/31/X1 Cash $ 3547 $ 2855 Accounts receivable 6579 5217 Inventory 2573 3220 CURRENT ASSETS $ 12699 $ 11292 Fixed assets Gross $ 22478 $ 24360 Accumulated deprec. (12017) (12927) Net $ 10461 $ 11433 TOTAL ASSETS $ 23160 $ 22725 LIABILITIES Accounts payable $ 1577 $ 1710 Accruals 233 380 CURRENT LIABILITIES $ 1810 $ 2090 Long-term debt $...
X Company prepares monthly financial statements. The following is the company's July 1 Balance Sheet: Balance...
X Company prepares monthly financial statements. The following is the company's July 1 Balance Sheet: Balance Sheet July 1 Assets Equities Cash $35,434 Accounts Payable $5,395 Accounts Receivable 5,618 Notes Payable 22,519 Inventory 14,313 Prepayments 3,011 Paid-In Capital 62,008 Equipment 63,027 Retained Earnings 31,481 Total Assets $121,403 Total Equities $121,403 The following were the company's July transactions: borrowed $26,000 from a bank bought equipment costing $10,300, paying the manufacturer $5,600 in cash and signing a note for $4,700 purchased a...
Williams Company is a manufacturer of auto parts having the following financial statements for 2018-2019. Balance...
Williams Company is a manufacturer of auto parts having the following financial statements for 2018-2019. Balance Sheet December 31 2019 2018 Cash $ 270,000 $ 145,000 Accounts receivable 160,000 235,000 Inventory 395,000 185,000 Total current assets $ 825,000 $ 565,000 Long-lived assets 1,740,000 1,600,000 Total assets $ 2,565,000 $ 2,165,000 Current liabilities 320,000 275,000 Long-term debt 900,000 900,000 Shareholders’ equity 1,345,000 990,000 Total debt and equity $ 2,565,000 $ 2,165,000 Income Statement For the years ended December 31 2019 2018...
FORECASTING FINANCIAL STATEMENTS - Company A reported an income statement and balance sheet as shown below:...
FORECASTING FINANCIAL STATEMENTS - Company A reported an income statement and balance sheet as shown below: Company A Income Statement For the Years Ended 2017 Sales 550.00 Cost of sales 275.00 Gross profit 275.00 SG&A 55.00 Depreciation 60.00 Interest 14.47 Pretax income 145.53 Tax 43.66 Net income 101.87 Company A Balance Sheet As of 2017 Cash 60.00 Accounts receivable 5.00 Inventory 8.00 Total current assets 73.00 PP&E - gross 600.00 Accumulated depreciation 200.00 PP&E - net 400.00 Total assets 473.00...
FORECASTING FINANCIAL STATEMENTS - Below is a pro-forma income statement and balance sheet for Company A...
FORECASTING FINANCIAL STATEMENTS - Below is a pro-forma income statement and balance sheet for Company A for a 5-year period and a terminal year, based on various assumptions, which already have been completed. Company A Income Statement For the Years Ended 2017 2018 2019 2020 2021 2022 Terminal year 2023 Sales     550.00            825.00               990.00                  1,138.50                    1,252.35                    1,340.01                        1,393.62                 1.50 (825*120%) (990*115%) (1138.50*110%) (1252.35*107%) (1340.01*104%) Cost of Sales     275.00            288.75              ...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT