Looking for an example of financial analysis paper or an analysis example report? Well, here is a good sample. One would wonder how big corporations such as Wal-Mart, Apple, Lowe’s, Verizon and Home Depot have sustained their business activities. They not only rely on the good advertisements and marketing skill for constant growth but also efficient accounting systems.
An efficient accounting system therefore plays a major role in running any type of corporation or company. Financial information helps interested players know the financial position of an organization.
Therefore to understand the purpose of accounting to organizations, it is important to first understand the different types of financial statements and how they work.
Financial Statement Analysis Paper
There are four basic types of financial statement organizations use to record day to day transactions. These statements include balance sheet, the income statement, the cash flows statement and retained earnings statement.
Each of this statement has its significance in the running of an organization’s day to day activity. They work together to show the general performance of an organization.
Financial statements also help the internal users such as employees and managers in many ways. The use of these statements and how they help both the external and internal is analyzed bellow.
The balance Sheet
A balance sheet is also referred to as a statement position. Balance sheet is a summary of financial balances of company. In a balance sheet, reports are added to a chart that shows liabilities and assets within a given period of time.
A balance sheet is classified in three main groups. These groups are the stockholder’s equity, assets and liabilities. In a balance sheet, assets have to be the same as the stockbroker’s equity and the liabilities at the end of a financial system. The main purpose of a balance sheet is to ensure that all figures are adding up in the long run.
The Income Statement
An income statement show a list of expenses spends on within a given period of time. The main expenses which include revenue are in depth broken down to show were the organization’s funds are going (Kimmel, et al, 2011).
An income statement is used to show whether an organization in succeeding or it is failing in its financial goals. The income statement reports the company’s operation profitability. An organization’s income statement do not show the investment transaction divided between the business and the stockbrokers. In this context, revenue is the selling of merchandise, lending of money and the renting of properties (Weygand, 2008).
Example of expenses is things such as delivery expenses, supplies of office stationaries, and telephone expenses among others.
Retained Earnings Statement
Retained earnings statement is used to show the amount retained in a given period of time and why they were retained. Looking at the retained earnings statement, an organization is able to see what a company has spent within a specific time frame.
This is a financial statement that lists the changes in retained earnings in the same period of time as the income statements. Retained earnings statements are derived from income statement, salary revenue, dividends, service revenue, etc. (Weygand, 2008).
Statement Cash Flows
Statement cash flow is divided into three sections. These sections are the investing activities, the operating activities and the financing activities. Statement cash flow give financial information about payments for the company and cash receipts. It also makes an organization aware of the net cash decrease and increase in a given period of time and the net cash at the end of the business period (Weygand, 2008).
A statement cash flow provides information on payments and cash receipts a company makes in a specific period of time. A statement cash flow also report on investment transactions (Weygand, 2008).
One may wonder why these statements are very important for an effective running of a business. These financial statements are very important for both the internal users of financial statements and the external users of financial statements (Jensen, 2009).
As much as the financial statements are useful to creditors and investors of a company, they are also important for employees and managers in the running of business.
Income statement is useful to managers since it shows the profits and loses made within a certain period of time. Internal users like company employees and managers use financial information to determine the current financial situation of their organization.
Financial statements help internal users to determine if they have enough money to pay stockholders, if their net income will help them maximize their potential among other financial factors (Jensen, 2009).
External users are potential investors who have an interested in investing in an organization and the creditors who lend an organization funds when needed.
The external users of financial statements use these statements to determine whether it is worth investing in a specific company. An income statement helps external financial statement user decide basing on prediction. Looking at these statements, eternal users are able to determine whether a company is worth investing into (Jensen, 2009).
A retained earnings statement helps external users determine their interests in a company. Some external users like growth while others like high pay outs. A balance sheet shows creditors the credit worthiness of a company.
The statement cash flows show the external users operating activities which are the most important resource. Investors would like to know what their money is being used for. They also want to know if they will get good returns after investing in an organization.
They can get this information only through accessing these financial statements (Jensen, 2009).
Conclusion financial statement analysis example report
From the analysis of this paper, the four financial statements are key for the growth of a company. Critiques will ask what make these reports important, and the answer is that all these financial statements interrelate to ensure companies work in an effective way.
Without these financial statements and reports, both the internal and external users cannot be able to determine the financial history of a company.
Financial statements also help investors and creditors know the right companies to invest in. Financial statement therefore summarizes a company’s economic situation. All financial statements are useful to both external and internal parties involved in the interest of the company.
References on Example of Financial Statement Analysis Paper
- Jensen, B. (2009). Financial statements – The external user’s roadmap. Retrieved from http://EzineArticles.com/2991172 on November 12, 2013
- Kimmel, P. D., Weygand, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th Ed.). Hoboken, NJ: John Wiley & Sons
- Weygand, J.J. (2008). Financial Accounting 6th Edition