Hrm 531 Week 4 Financial Statements

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Financial Statement Paper The financial statements are prepared to show the financial performance of business organizations in respect of their operations, asset bases and profitability capacities, among other attributes (Alvarez & Fridson, 2011). The four major financial statements prepared by different entities are:  The balance sheet It is prepared to highlight the financial position of a particular firm at a specific point in time mostly at the end of its financial/trading period (Taparia, 2004).  The income statement This statement shows the profits or loss realized by a business entity in the course of purporting its operations at the end of its financial year (Taparia, 2004).  Cash flow statement A cash flow statement reflects…show more content…
To achieve this, the management needs to make viable and reliable business decisions regarding the operations of the entity on continuous basis (Taparia, 2004). The information contained in the four financial statements put the management in a better position of realizing this objective considering that it assists in the identification of the weaknesses and strengths of different organizations on top of showing important trends in their performance during different financial periods (Alvarez & Fridson, 2011). The comparative information provided in the financial statements assist the management to compare its past performances as well as its current one with those of its competitors in order to come up with efficient strategies to better a firm’s performance (Taparia, 2004). Calculation of different financial ratios from these statements specifically yields the information to be used by the management while undertaking all decision making exercises (Alvarez & Fridson,…show more content…
The four financial statements therefore assist them to determine if their resources are being put into efficient use since this provides an indication of whether there is any risk they will end up losing the invested funds (Debarshi, 2011). Potential shareholders also rely on the financial statements to make a comparison of the performance of different entities before making important investment decisions (Taparia, 2004). Creditors Creditors supply goods and services to businesses on credit. They are mainly concerned with the liquidity of the firm and its ability to meet their obligations when they are due (Debarshi, 2011). They therefore rely on the balance sheet and income statement to determine the profitability and liquidity levels of different firms in order to make well grounded decisions relating to whether to go ahead and advance them goods and materials on credit (Debarshi,

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