handout-fin2 - Assessing the Firm's Viability from Its...

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Assessing the Firm’s Viability from Its Financial Statements: A Study Aid During the accounting cycle, the accountants track, organize and record the financial dealings of a company. At the close of each period, accountants use the information they have gathered to prepare financial statements. The most common financial statements are: The Income Statement : is a business financial statement that lists revenues, expenses, and net income throughout a given period. It shows the flow of activity and transactions over a specific period of time. The Balance Sheet : is a statement that provides a quantified summary of the assets and liabilities of an organization at a specified date; it is usually produced annually, giving figures relating to the last day of its annual accounting period. The first part of the statement lists the fixed and current assets and liabilities of the organization; the second shows the source of funds (i.e. shareholding, loans, etc.). The balance sheet presents the assets owned by the business, the liability owed to others and the accumulated investment of its owners. The Cash Flow : is the amount of net cash generated by an investment or a business during a specific period. Cash flow is calculated by adding non-cash charges, such as depreciation, to net income after taxes. Because cash is the fuel
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