Financial Statements Paper Essay Example

The following paper will talk about the income statement and what the income statement tells about the company including why this statement is important and what business decisions can be made using the income statement. Also, the paper will talk about the balance sheet and what the balance sheet tells about the company. Also, the reason the balance sheet is important and what business decisions can be will be covered. Lastly, it will talk about the statement of cash flows and what it tells about the company. It will talk about what kind of business decisions can be made using the statement of cash flows. In the conclusion the paper will provide the information how data provided in the statements can assist in making business decisions and what information is not provided that can assist managerial decision making.
As it was indicated by FASB, the main purpose of financial reporting is to provide financial information about company performance. The income statement is one of the most important financial statements because of its predictive value and qualitative characteristics. The income statement is also known as profit and loss statement that records company revenues and expenses during a certain period of time. The reason the income statement has very high importance is because it can determine the company’s operating performance during a specific period of time. “Specific items that are causing unexpected expenditures can be pinpointed, such as phone, fax, mail, or supply expenses. Income statements can also track dramatic increases in product returns or cost of goods sold as a percentage of sales” (Business Town, 2010). Also because it provides so much important information about the business, the income statement is required by lenders, investors, and vendors. There are many users that can make their business decisions based on an income statement of the organization. The bank can use income statement information to determine if a company produces enough