just need three points addidtion

Differences:

1. The reporting period is different – Ascension reports its financial data as of 30th June, while HCA Holdings reports its financial data as of 31st December.

2. The section that presents the difference between the total assets and total liabilities. The Ascension’s statement of financial position refers to this section as net assets, whereas the HCA Holdings refers to this section as shareholders’ equity. The reason for this difference is the nonprofit does not have owners.

3. Subparts are reported as unrestricted, temporary restricted and permanently restricted net assets in the Ascension’s balance sheet while in the HCA Holdings’ balance sheet they are reported as retained earnings, paid-in capital and common stock.

4. Ascension as a nonprofit organization is exempt from paying taxes while HCA Holdings as a for-profit organization pays taxes. Hence, in the income statement there is no tax entry for Ascension.

5. Ascension’s financial statements have a better, more clear and visible structure.

Similarities:

1. Both companies use the indirect method to present its Cash Flow Statement.

2. Both companies are profitable.

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Part II

Each of the three statements is very useful and helps the management, investors, creditors and the other users of the financial statements to determine the “health” of the organization and to make an educated guess on its future prospects.

The Balance Sheet shows the organization’s assets, liabilities and shareholders’ equity at a single point in time (the reporting date). The three balance sheet segments show what the company owns and owes, as well as the amount invested by shareholders. Assets in the balance sheet should equal Liabilities plus Shareholders’ Equity. Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Balance sheet should be compared with those of previous periods in order to get a better idea of how the company is performing, as by itself it cannot achieve this purpose. Many ratios can be derived from the balance sheet that help the users of the balance sheet to get a sense of how healthy a company is (i.e. Debt-to-equity ratio, current ration etc.)

The Income Statement measures a company’s financial performance over a specific period. It is important because it shows the profitability of a company during the reporting time interval. It shows how an organization incurs its revenue and expenses through both operating and non-operating activities. It also shows the bottom line profit or loss incurred during that specific period which is typically a fiscal quarter or year. The part of the income statement that deals with operating items is very important to the users of the income statement because this section discloses information about revenues and expenses that are a direct result of the regular business operations.

The Cash Flow Statement shows changes in the entity's cash flows during the reporting period. It provides information regarding all inflows a company receives from its ongoing operations and external investments, as well as all cash outflows that pay for business activities and investments during the reporting period. It reports the cash generated and used during the reporting time interval. The statement is divided into three major categories: Operating, Investing and Financing Activities. It helps user of this statement to see if a company is having trouble with cash. The cash flow statement is different from the income statement and balance sheet because it does not include any future incoming and outgoing cash that has been recorded on credit.

In my opinion the financial statements presented by Ascension are more useful as they are better structured and give a bit more detailed information. This can be seen more clearly when comparing the cash flow statement (CFS) of the two companies. The Ascension’s CFS clearly defines the three categories and the subtotal of each part is clearly visible while the CFS of HCA Holdings is a bit more difficult to read and not as well structured.

If, due to time constraints, the organization could prepare only one financial statement I would recommend the Cash Flow Statement. The main goal of any company is to maximize the value of its shareholders which can be achieved only if the company is generating cash. When a company is consistently generating more cash that it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. Furthermore, because the income statement is prepared under the accrual basis of accounting, the revenue reported may not have been collected and similarly, the expenses reported might not have been paid. The balance sheet changes can be reviewed to determine the facts but the cash flow statement already has integrated all that information. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important. Some investors even believe that “cash is king”.