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uses and limitations of Income statement

uses and limitations of Income statement - their business...

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Uses and 2 limitations of Income statement: 1. Provide Overview: Uses: An income statement provides potential investors with an overview of how well a business are doing and whether the business is likely to be a good investment. Investors can get an idea of the business's cash flow, revenue, assets and liabilities by examining income statements. Limitation: Investors may not get an in-depth idea of the business's strength from the income sheet; the information on this statement simply provides an estimate of how much the business is likely to make and what types of financial decisions it makes. 2. Assist With Budgeting: Uses: Business owners can use the income statement to help them plan their budget for
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Unformatted text preview: their business. By looking at the income sheet, business owners can determine areas in which their expenses outweigh their revenue and cut expenses accordingly. Limitation: Income statements provide only cold, hard facts, not the human factor. Thus, a business owner may find some cuts more difficult to implement than others because of employee reactions. Reference: Securities and Exchange Commission; Beginners' Guide to Financial Statements; February 2007 . Retrieved from: http://www.ehow.com/info, income-statement-uses-limitations....
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