Computing and interpreting financial ratios is the cornerstone of financial statement analysis. The main financial statements are the balance sheet, income statement and statement of cash flows.
Accounting
Financial Statement Analysis - Ratios
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Measuring Cash Flow - The Cash Flow Statement
As discussed in another article, the income statement provides a measure of an organization's performance in generating net assets. Because net assets are claims on cash, the income statement doesn't measure the organization's performance in generating cash directly.
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Measuring Performance - The Income Statement
The economic performance of an organization over a period of time is reported by an income statement. It reports all revenues and expenses over a specific time period. This differs from the balance sheet, which shows the financial status of an organization at a specific point in time.
The main sections of the income statement include:
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Measuring Financial Position - The Balance Sheet
One of the main financial statements used by decision makers in an organization is the balance sheet. The balance sheet shows the financial status of an organization at a specific point in time. It's a “snapshot” of how the firm is doing. It also referred to as the statement of financial position or the statement of financial condition.
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Basic Accounting Concepts
This article deals with basic accounting principles that most business people and managers need to be familiar with.
What is accounting?
Accounting is the main way information about economic activities is communicated. Accountants analyze, classify, record, summarize and interpret economic transactions. This information is then provided to decision makers in the form of financial statements. The primary emphasis is on providing clear information to others, so that they can make informed decisions for the organization.
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