Question

Discuss Balance Sheet, Income Statement, Cash Flow Statement, and Statement of Stockholders' Equity. Mention the main features of each statement and how each of the statements listed can be used for analyzing the financial condition of a company.

Answer 1

ITEMS	FEATURES	How it can be used to analyzes the financial condition of a company?
Balance Sheet	It is the last stage of final accounts It is prepared on the last day of an accounting year. It has two sides - left hand side known as asset side and right hand side known as liabilities side. The total of both sides are always equal.	Using  ratio analysis.Financial ratio analysis uses formulas to gain insight into a company and its operations. eg.. Liquidity ratios,Asset Management ratios,Leverage ratios,Profitability ratios The balance sheet must balance with assets minus liabilities equaling shareholder’s equity. The resulting shareholder’s equity is considered a company’s book value. This value is an important performance metric that increases or decreases with the financial activities of a company.
Income Statement	A firm's revenues, gains, expenses and losses are listed on the income statement. .An income statement should only include transactions that occurred within a certain period of time (e.g. Quarter-to-date, Month-to-date, Year-to-Date) Revenues minus expenses, plus gains minus losses, equal net income or net loss.	Basic analysis of the income statement usually involves the calculation of gross profit margin, operating profit margin, and net profit margin which each divide profit by revenue. Profit margin helps to show where company costs are low or high at different points of the operations.
Cash Flow Statements	The cash flow statement shows the amount of cash within a company Items that affect the cash balance are listed on the statement. Very useful tool for planning	The first section of the cash flow statement is operating activities, which shows the cash flowing in and out of the company in relation to its business operation. The next section, investing activities, shows cash the company received and spent on a company's capital investments. The financing activities section shows the inflows and outflows of cash related to the company’s issued financial securities
Statement of Stockholders' Equity	.This statement shows the changes in the shareholders’ equity account. The first line item is the beginning balance for common stock. The amount of newly issued common stock is added to the beginning balance to get the ending balance. The ending balance for common and preferred stock and the ending balance for retained earnings is added together to get the total of the shareholders’ equity.	Shareholder equity can be either negative or positive. If positive, the company has enough assets to cover its liabilities. If negative, the company's liabilities exceed its assets; if prolonged, this is considered balance sheet insolvency. For this reason, many investors view companies with negative shareholder equity as risky or unsafe investments. Shareholder equity alone is not a definitive indicator of a company's financial health; used in conjunction with other tools and metrics, the investor can accurately analyze the health of an organization.