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ACC 561 Week 1 Financial Statement Differentiation Paper.doc






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Financial Statement Differentiation Paper

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This particular assignment consists of learning about and acquiring an understanding of
the four most pertinent types of financial statements. As well, this assignment will show how
each of these statements contributes to a company’s financial analysis and how each statement
has specific significance to creditors, investors and management. I chose the company Target to
conduct a brief financial analysis.
An income statement, to put it simply, is a statement that provides company expenses and
revenue information. P&L (profit and loss) is another name for this statement. The income
statement clearly shows that if a company’s income exceeds its expense, then the company has a
net profit. If the income is less than the company’s expenses, then there is a net loss. This
particular statement would be the most important to investors since it displays the company’s
prior financial history and helps to predict their future financial status. Investors want to feel
secure in their decision to invest in a company. They want their decision to invest in a company
to be profitable and for that to be reflected as such in the company’s income statement.
The statement of cash flows is the statement that is useful to show the flow of cash
during any given reporting period. Working with the statement of cash flows, one learns about
accounts payable, accounts receivable and depreciation. Creditors would be the ones that would
have the most interest in the statement of cash flows. Creditors would be able to determine a
company’s ability to meet their obligations as well as pay their dividends. The statement of cash

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flows takes multiple aspects of the balance sheet and income statement to essentially put them
together to effectively show uses for the period and to show cash resources.
The statement of balance sheet provides a company with their specific assets and
liabilities information. With that said, accounting, interestingly enough, is based on double entry.
What this means is that every time there is a financial entry there needs to be an equal and
opposite entry. When accounting entries show a net effect of zero, this means that the entries are
balanced, therefore the books are balanced. The formula for this would be, Assets = Liabilities +
Equity. The company’s management would find this statement to be the most interesting since it
gives them a picture of a single point in a company’s calendar year displaying its financial
condition at that single point in time. This gives management an idea of how they may resolve a
particular problem or even realize that there may be no problem.
Within a specific period, the statement of retained earnings displays changes in a
company’s retained earnings. GAAP (generally accepted accounting principles), is the guideline
for the statement of retained earnings. Statements of retained earnings are prepared according to
the GAAP. The statement of retained earnings reconciles for a given period, from the start to the
end of that period, using information such as net profit from any one of the other financial
statements. The statement of retained earnings would be of interest to investors and management.
Target’s trade symbol is TGT. Target’s current market trade value is $52.54. Target
Corporation (NYSE:TGT) has reported that its net retail sales for the four weeks ended January
28, 2012 were $4,608 million, an increase of 5.1 percent from $4,383 million for the four weeks
ended January 29, 2011. On this same basis, January comparable-store sales increased 4.3

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