Question

-What are the three financial statements and highlight some differences between them in your own words.
-Do you think that they're intuitive?
-What are some things a firm's debt ratio can tell you about that firm?
-As an investor what are some things that you would look for in the financial statements of a firm to help your decision to invest or not to invest?

Answer 1

statements are Ans. i) ; in The three financial Income Statement Balance Sheet Cash flow Statement Income Statement reflects the profitability of the company. It is always prepared for a certain time period. It reflects the revenue earned by an organisation also it consists of the expenses incursed by an organisation over a period of time Balance sheet is prepared at a specific point in time such as at the end of the quarter of year. It reflects the companies resources lie assets) and funding for those resources (diabilities and stockholders equity). Assets should always be eqrial to the sum of liabilities and T earth. Cash flow statement is basically an elaboration of the cash account where we reconcile the each balance at the beginning to the cash balance at the end of the period. It begins with net income and then various adjustments for hon eash expenses and non cash incomes are heade to arrive at each from operating bra operations. Cash from investing & financing are then added to cash flow from operations to arrive ! Hat het change in eash for the year

financial statements are not intuitive I rather are prepared according to the Standards of Accounting The debt Ratio is a financial ratio that measures the extent of a company's leverage in telms of total debt to total assets debt latio greater than 9.0 tells you that a company has mole debt than assets. Whereas, a debt ratio less than 1.0 indicates that a company has more assets than debt. As an investor few things that I would I look for in the finnial statements of a from to help me in deciding to invest of not are - Net profit - Financial Statements reveal companys Net Profit. Net profit is the money that a business has left over after paying all the expenses. b) Sales - sales reflect the turnover of the comperny showing thereby its capability to bear the expenses. ato e Margine - Sales are meaningless untill the company is making honey. Higher hargins lead to a better retuen for investors. d) Cash Flow - free lash flow, ic. tash left after meeting out your expenses, is a sign of sustainable operations