Acc 561 Week 1 Paper

ACC/561 Week 1 Differentiation Paper

Financial Statement Differentiation Paper

John Smith

ACC/561

September 9, 2012

Professor John Doe

Financial Statement Differentiation

There are four main types of financial statements. “There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders over time, (Securities and Exchange Commission, 2007).”

Which financial statement, or statements, would be of most interest to investors?

While all four financial statements are important to investors, most will go directly to the company’s income statement first. The income statement will allow the potential investor to see at a glance how much a company made or spent which will give a high level overview of the strength and profitability of the company.

Which financial statement, or statements, would be of most interest to creditors?

Again, all four of the financial statements are important to creditors, however the most important is usually the balance sheet. The balance sheet allows the creditors to see at a glance how much the company owns and how much it owes, which becomes the basis for determining the company’s ability to cover short-term debt and liabilities. Essentially allowing the creditor to determine the risk of loaning to the company.

Which financial statement, or statements, would be of most interest to management?

The financial statement most important to management is the cash flow statement. The...