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Running head: FINANCIAL STATEMENTS 1

FINANCIAL STATEMENTS 4

Financial Statements

Student’s Name

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Balance Sheet

A balance sheet is a financial statement that illustrates a summary of the financial balances of an organization as it lists the liabilities, assets, and stakeholder’s equity at a particular time (Yeo, 2015). It is an essential tool since it can be used as a statement of showing the financial position of a business.

Importance of a balance sheet

The information is useful to stakeholders as they use it in understanding the financial condition of an enterprise. Also, they can follow the performance and growth of the business since different balance sheets of several different years can be compared. In case the stakeholder requires a bank loan, he or she can submit the balance sheet to the desired bank (Blessing & Onoja, 2015), and the bank can know whether the business qualifies for the loan. By analyzing the information of balance sheets, a stakeholder can undertake projects

Statement of cash flow

It is a financial statement which indicates the amount of cash generated by a business as well as cash spent during a given period.

Cash flow information resulting from investing activities is presented in the statement. This may include loans received or made to suppliers and purchase or assets sold, for example, land or equipment. The cash inflow from investors and cash outflow to shareholders is presented in the financial activities category. Operating activities cash flow is also included in the statement. This includes payment collected from customers, sales, and production (Osadchy et al., 2018). Non- cash financing activities are revealed within the statement.

Importance of cash flow statement

It helps stakeholders in knowing expenditure of money and help them in long term planning for their businesses. It is useful for entrepreneurs as excess cash (Yeo, 2015) can be created (Blessing & Onoja, 2015). This is through profits generated and other ways used in creating money. Moreover, optimum levels of cash balance can be known.

Analyzing financial statements helps in determining a company’s health and its stability. As a result, stakeholders can understand how to conduct their business. Financial statements are crucial tools (Osadchy et al., 2018) as they help entrepreneurs to make both long term and short term plans.

References

Blessing, A., & Onoja, E. E. (2015). The role of financial statements on investment decision making: a case of united bank for Africa PLC (2004-2013). European Journal of Business, Economics and Accountancy, 3(2), 12-37.

Osadchy, E. A., Akhmetshin, E. M., Amirova, E. F., Bochkareva, T. N., Gazizyanova, Y., & Yumashev, A. V. (2018). Financial statements of a company as an information base for decision-making in a transforming economy.

Yeo, J. (2015). Financial statement analysis.