Stacyu01a1 - Unit 1 Assignment-The Importance of Financial...

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Unit 1 Assignment-The Importance of Financial Information 1 Unit 1 Assignment- The Importance of Financial Information Jennifer J Stacy October 11, 2010
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Unit 1 Assignment-The Importance of Financial Information 2 The income statement's purpose is to provide investors the most accurate description of the company's profitability over a set period of time, usually a fiscal quarter (three months), or a fiscal year (12 months). This includes an estimate of the firm's sales, costs, increase or loss in intangible value, taxes, outstanding shares, and how the resulting net profit is divvied up to shareholders. The purpose of the balance sheet is to show a company's Assets, Liabilities and Equity at a given point in time, usually the company's fiscal year end. This is as opposed to an Income Statement, for example, which shows earnings throughout the year. A balance sheet is as of a given day. It does not show activity for a whole year, although you can compare year-to-year balance sheets to deduce some information. The purpose of the statement of cash flows is to provide an entry for the cash balance shown on your balance sheet. But, in essence, the statement of cash flows provides a business with so much more. An examination of the statement of cash flows will show you exactly where your cash surplus or deficit is coming from.
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