Statement of Financial Position / Balance Sheet Paper

FINANCIAL STATEMENTS
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Financial Statements
Financial statements indicate the overall financial health of a company (Fridson & Alvarez, 2011). As a result, potential investors use them while making economic decisions.
Statement of Financial Position/Balance Sheet
The contents of the balance sheet include equity items, assets, and liabilities (Fridson & Alvarez, 2011). The assets and liabilities may be divided into non-current and current liabilities/assets. Current assets are expected to remain in the business for not more than one year. Examples include office furniture, land and motor vehicles.
Current liabilities such as taxation, creditors and accruals are repaid within a year. On the other hand, non-current liabilities are repaid within a period of more than a year. Examples of non-current liabilities are debentures and long-term loans (Epstei, 2012). Lastly, non-current assets such as debtors and stock remain in the company for more than a year.
The balance sheet enables an investor to determine the credit risk, financial risk, business risk and liquidity risks of an entity (Stolowy & Lebas, 2006). An investor can use this tool to compare the performance of a given company with that of its competitors. As a result, the best company to invest in will be selected according to the analysis.
Income Statement
The components of an income statement are the revenues, cost of the items sold, expenses and other incomes. The expenses are split into administration and distribution expenses. Examples of administration expenses are electricity and factory rent, while advertising expense falls under distribution expenses. Other items found in this statement are; income tax and finance charges.
The income statement shows the total comprehensive income made by a business. An investor will use this information to assess whether the company will be in a position to regularly pay dividends. Notably, dividends are paid out of profits and thus, only a company that has made profits can pay dividends.
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