The Role of Financial Statements in an Effective Market
Financial Statements
The Role of Financial Statements in an Effective Market:
Financial Statements are a company’s primary source of financial information. If you want to invest in a company and needed to know how to find out if a certain company is worth the investment you would take a look at the company’s financial statements. Simply put a financial statement is a declaration of what is believed to be true about a company, communicated in terms of a monetary unit, such as the dollar. The financial statements will show what are the sources of the company’s revenue and how is the money spent. What does the company own and what does it owe others? How much profit has the company made and what is the financial health of the organization?
Companies prepare balance sheets as a way of summarizing their financial positions at a given point in time. The other financial statements relate to the balance sheet and show how important aspects of a company’s financial position change over time.
The balance sheet is a summary of an enterprises' assets, liabilities and equity at a specific moment of time. To simplify this description even further we could say that the balance sheet shows an entity's possessions, obligations and others' debts to it.
As we all know a fundamental characteristic of every balance sheet is that the total figure for assets always equals the total of liabilities plus owners' equity. As we have already seen, actually the above simple equation, representing the theoretical essence of this document, and a basis of its practical side, is the reason for it to be called balance.
To summarize in short the practical side of the balance sheet, no matter how often it is drawn, and what of the two popular forms it is presented in, the balance sheet, as known, consists of three major parts: assets - or what the firm possesses and has the right receive in future; liabilities - or what the firm's obligations are; shows also how many of these should be returned
The Role of Financial Statements in an Effective Market:
Financial Statements are a company’s primary source of financial information. If you want to invest in a company and needed to know how to find out if a certain company is worth the investment you would take a look at the company’s financial statements. Simply put a financial statement is a declaration of what is believed to be true about a company, communicated in terms of a monetary unit, such as the dollar. The financial statements will show what are the sources of the company’s revenue and how is the money spent. What does the company own and what does it owe others? How much profit has the company made and what is the financial health of the organization?
Companies prepare balance sheets as a way of summarizing their financial positions at a given point in time. The other financial statements relate to the balance sheet and show how important aspects of a company’s financial position change over time.
The balance sheet is a summary of an enterprises' assets, liabilities and equity at a specific moment of time. To simplify this description even further we could say that the balance sheet shows an entity's possessions, obligations and others' debts to it.
As we all know a fundamental characteristic of every balance sheet is that the total figure for assets always equals the total of liabilities plus owners' equity. As we have already seen, actually the above simple equation, representing the theoretical essence of this document, and a basis of its practical side, is the reason for it to be called balance.
To summarize in short the practical side of the balance sheet, no matter how often it is drawn, and what of the two popular forms it is presented in, the balance sheet, as known, consists of three major parts: assets - or what the firm possesses and has the right receive in future; liabilities - or what the firm's obligations are; shows also how many of these should be returned
Bibliography: Arnold J., and S. Turley, Accounting for Management Decisions, 3rd ed., 1996, Prentice Hall Europe (UK) Limited London Berry A. and R. Jarvis, Accounting in a Business Context, 2edshnvd. ed., 1994, Chapman & Hall London Watts J., Accounting in the Business Environment, 2nd ed., 1996, Pitman Publishing London Adam, J.H., Longman Dictionary of Business English, 2nd ed., 1989, Longman Group UK Ltd.