Question

In: Accounting

Which financial statement would you find most valuable? Why?

Which financial statement would you find most valuable? Why?

Solutions

Expert Solution

Generally Income statement is the most valuable financial statement among all available financial statements for common users.

Because Income statement provides the accurate profitability of the company and it depicts all the revenues and expenses associated with those revenues earned in dollars.

By visualizing income statement, it is easier for the stakeholder's to know about the exact figure of gross income ,operating income and net income or loss of the business.

Different users of accounting information uses different accounting reports ( statements). Like the existing stakeholder's use income statement to know the profitability of the company. Prospective investors use balance sheet ,to know the financial and structural condition of the company. Creditors use cash flow statement to know the availability or abundance of cash and cash equivalents to secure their prompt payment.

But as we know the life blood of the business is called profit. So in general judgement of profitability, Income statement is most of use and considered itself as the most valuable financial statement .


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