Mt217 Seminar Alternative

Financial Statements

MT217 Finance

March 19, 2012

The basic financial information that corporations provide on financial statements include the balance sheet, assets, liabilities, short term debt, long term debt, equity, income statement and the statement of cash flows. Throughout this paper, we take a closer look at what each of these are and what they represent for the company.

The balance sheet is like taking a picture on a specific date that shows a company’s assets and how those assets are financed; are they debt or equity? Balance sheets are always comprised of the most recent information which will be at the end of a fiscal year for the company. Assets symbolize a company’s investments and are either classified as short term or long term. Short term assets commonly include items that will be satisfied and therefore changed into cash within one year, whereas long term or fixed assets, include investments that help generate cash flows over longer periods.

Short term debt is labeled as a current liability and represents debt that is due to be paid off within a short amount of time, usually within one year. Short term debt includes accounts payable, which is amounts owed to suppliers, accruals which is amounts owed to employees and state and federal governments, and notes payable which is amounts owed to banks.

Equity represents stockholders ownership which unlike debt does not have to be repaid. Total equity is the amount that would be paid to stockholders. If the company’s assets could be sold at the values reported on the balance sheet and its debt could be repaid in the amounts reported on the balance sheet. Thus, the company’s common stockholder’s equity or net worth, equals total assets minus total liabilities.

The income statement which is also referred to as the profit and loss statement shows the results of business operations during a specific point of time such as a quarter or a year. It condenses the incomes generated and the...