Learning from Financial Statements

Jun 18th, 2015
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A company's annual report is designed primarily to provide the company's investors with the information contained in its financial statements. But if you, as a manager, study the statements carefully, you're taking advantage of a good opportunity to learn about your company and about how your decisions may affect the company's financial condition.

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8420464593Learning from Financial StatementsA company's annual report is designed primarily to provide the company's investors with the information contained in its financial statements. But if you, as a manager, study the statements carefully, you're taking advantage of a good opportunity to learn about your company and about how your decisions may affect the company's financial condition.The three financial statements that most companies include in their annual reports are the balance sheet, the income statement, and the statement of cash flows.The balance sheetThis can also be called a statement of financial condition or a statement of financial position. It reports what the company owns (its assets), what it owes (its liabilities), and the value of the stockholders' interest (owners' equity) at a moment in time. You can learn several fact from the balance sheet:the company's ability to satisfy its creditors, manage its inventory, and collect its receivableswhether the company can easily handle the normal financial ebbs and flows of revenues and expenses, or whether it needs to bolster its cash reservesyou can identify and analyze trends, especially in receivables and payables, that may need attentionThe income statementThis can also be called a statement of operations, an earnings statement, or a profit and loss statement. It reports the money received by the company (revenues) and the money spent by the company (expenditures) during a reporting period. It

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