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Category: Business and Industry
Date Submitted: 02/03/2014 02:14 PM
Financial Statements Paper
ACC/497
Financial Statements Paper
The financial statements of an organization, such as Home Depot, are used by investors and creditors to evaluate the financial performance. The financial statements of an organization are also used by the managers of that organization to make informed business decisions. Three financial statements in particular are viewed more readily regarding financial performance of an organization. The three major financial statements used most often are the income statement, balance sheet, and the statement of cash flows. The income statement, balance sheet, and the statement of cash flows for Home Depot provide pertinent financial information for investors, creditors, and management.
Income Statement
An income statement measures the financial performance of an organization over a specific period. The financial performance is measured by reviewing revenues of an organization and the operating expenses incurred. The difference among the revenue and expenses of an organization results in a net profit or a net loss. The two more common ways of preparing an income statement is through the single-step or multiple-step format.
The single-step format consists of subtotaling the revenues at the top of the statement. The expenses are subtotaled after the revenues. Revenue exceeding expenses results in a net profit, whereas expenses exceeding revenue results in a net loss. The multiple-step format is used more readily as it easier to ascertain specific information within the financial statement. The multiple-step income statement separates operating activities from non-operating activities. The operating activities section consists of information that is directly resulted from business operations, which makes it appealing to investors. The non-operating activities section of the income statement consists of information that is not directly associated with business operations. The...