There are four types of financial statement reports that are used in every business to help keep track of the financial health of businesses; they are the billing sheet, income statement, retained earnings statement, and the statement of cash flows. Each of the four statements has their own use but rely on the others for information making them all connected in some way shape or form. The balance sheet is one of the four financial statements that are commonly used to show the financial health of a business, it shows what assets and liabilities a business currently has during that year or cycle; the assets are what the business owns and the liabilities are what the business owes. Creditors will look at the balance sheet to determine if they will be repaid by that business and decide whether they are a good risk or not, it shows if a company relies on debt such as loans or whether it uses stockholders equity to finance its assets; they compare the amount of debt versus the amount of stockholder equity that is used. Internally with the business itself the balance sheet will be used to see what happened that year or cycle and determine how to plan for future use. The income statement is one of the four financial statements that are commonly used to show the financial health of a business, it shows the revenue and expenses a business has during that year or cycle and reports the success or failure of the company operations for that period of time. This report is used both internally and externally to see if the company operations are profitable, it will show if it has net income or net losses. Internally the business will look at the income statement to see how successful the company is at generating a profit for its sales to determine how to plan for the future.
The returned earning statement is the financial statement that depends on the results from the income statement and shows how much income is paid out to both creditors and stockholders and how much is kept in the company for future growth of the company. The statement is used both internally and externally to see whether a business is fast growing and whether it will be able to sustain in financial crisis if there becomes a need for immediate cash.
The statement of cash flows is one of the financial statements that are used to measure the financial health of a business; this report is used to show where a business obtained its cash and where it spent its cash and is directly related to the balance sheet. Cash is considered the most important asset and excess cash can be used to invest in other securities such as stocks and bonds of other corporations to have longer lived assets than just investing; so externally someone looking to…