Week 1: Introduction to Financial

Statements - Discussion
Financial Statements (graded)
Class,
One key concept for week 1 is that financial statements are comprised of 4 statements: 1) Income Statement, 2)
Balance Sheet, 3) Cash Flows Statement, and 4) Statement of Retained Earnings.
External users of financial statements, such as investors or banks, review the financial statements to perform
analysis on the company. For example, to determine if s/he wants to buy the stock of a company, the investor
may review how much profit the company has generated during the past two years. Or, to determine if a bank
should provide a loan to the company, the loan officer may review the company's cash balance from the
previous two years.
Which financial statement do you believe provides the best information to determine if a company is
performing well financially and/or is financially stable? Why?

Responses
Response

Author

Date/Time

RE:
Financial
Statements

Dimitra Arrieta

9/2/2012 10:20:56 PM

Modified:9/2/2012 10:21 PM

Financial statement
From Wikipedia, the free encyclopedia
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Historical financial statement

A financial statement (or financial report) is a formal record of the financial
activities of a business, person, or other entity. In British Englishincluding United
Kingdom company lawa financial statement is often referred to as an account,
although the term financial statement is also used, particularly by accountants.
For a business enterprise, all the relevant financial information, presented in a
structured manner and in a form easy to understand, are called the financial
statements. They typically include four basic financial statements, accompanied by a
management discussion and analysis:[1]
1. Statement of Financial Position: also referred to as a balance sheet, reports
on a company's assets, liabilities, and ownership equity at a given point in
time.
2. Statement of Comprehensive Income: also referred to as Profit and Loss
statement (or a "P&L"), reports on a company's income, expenses, and profits
over a period of time. A Profit & Loss statement provides information on the
operation of the enterprise. These include sale and the various expenses
incurred during the processing state.
3. Statement of Changes in Equity: explains the changes of the company's
equity throughout the reporting period
4. Statement of cash flows: reports on a company's cash flow activities,
particularly its operating, investing and financing activities.
For large corporations, these statements are often complex and may include an
extensive set of notes to the financial statements[2] and explanation of financial

policies and management discussion and analysis. The notes typically describe each
item on the balance sheet, income statement and cash flow statement in further detail.
Notes to financial statements are considered an integral part of the financial
statements.
http://en.wikipedia.org/wiki/Financial_statement

RE:
Financial
Professor Thomas
Statements

9/3/2012 4:08:56 PM

Hi Dimitra,
Just wanted to remind you to answer the question posed in the discussion
thread ... which financial statement do you believe provides the best
information?
Thanks!

Financial
statements

Marvalyn Richards

9/2/2012 10:27:40 PM

I am taking a wild guess to correct myself later if my answer is incorrect. I say the Statement of
retained Earnings. I am just going by the meaning of retained, which is to hold. You see, Income
statement shows everything that comes in, Balance sheet shows the balance that is left after expenses,
Cash Flows Statement shows as it says, how cash flows, when it comes in, how it comes in, and maybe
how and when it goes out. A Statement of Retained Earnings suggests that it is cash that a company is
retaining, holding on to. I will be back.

RE:
Financial Professor Thomas
statements

9/3/2012 4:15:43 PM

Hi Marvalyn,
Good first guess. You are correct in focusing on the word "retained" in the
title "statement of retained earnings". This statement does reflect what the
company is holding, however it reflects the amount of net income that the
company is still holding. (Rather than cash.) In other words, think of it as
saying ... a company has generated 100 million of profit, how much of the
profit is still retained (or held) by the company.
We will walk through this more in class on Thursday. Great job in taking a

stab!

Financial
statement

Diangelo Miller

9/4/2012 10:23:28 AM

I believe the statement of retained earnings because I believe what the person have in
savings after paying all liabilities will show there net worthand how much they make
and will make yearly.

RE:
Financial Marvalyn Richards
statement

9/9/2012 7:07:17 PM

I believe Professor pointed out that it is the Cash Flow Statement. I was thinking the
same way as you do: that the Cash Flow Statement shows money going in and out, thus
would not reflect the company's performance. But now I understand, or so I think, that
the performance of a company is just that, what has been happening, not just what is
retained. I love this class.

Financial
Statements

Edward Steward

9/4/2012 6:04:19 PM

I would think the Cash Flow Statement would be the best source. I'm just taking a stab
but doesn't the cash flow statement show how much money comes into and is going
out of the business. Showing the spending practices of the company and the income
made.

RE:
Financial
Professor Thomas
Statements

9/4/2012 8:54:01 PM

You are right, the statement of cash flows shows how the company generates
cash and where it is spent. However, as you read the chapter for this week,
pay close attention to the difference between income and cash generated.

RE:
Financial
Statement Edward Steward
s

9/7/2012 8:52:54 AM

So would I be right in understanding that the income represents the

companies operation expenses, revenues and cost of goods. While

cash represents lets say the companies physical assests. Representing
the uses or sources (operatings, investing and finance)

Financial
Statement

Bruce Burbank

9/4/2012 9:19:50 PM

In reviewing the four options, item number 4 (Statement of Retained Earnings) is

probably the best choose to answer the question. In reading from chapter 1, it talks
about earning retained over a period of time, which shows how financial stable a
company has been for a given period of time. This may impact how future investors
look at that company's portfolio toward growth opportunities.

Financial
Statment

Amirah Howard

9/5/2012 5:08:00 AM

Retained earnings, because from what I read in the book. It says that these three
transactions, revenues, expenses and dividends affect retained earnings.

Financial
Statements

Marie Roberts

9/5/2012 10:05:51 AM

I believe that the financial statement that provides the best information on
how a company is performing financially and/or is financially stable is the
Statement of Retained Earnings. This statement can give you a good idea of
how financially stable a company has been over a given period of time. This
statement can give you a good idea of the revenue, expenses and dividends
of a company. In other words, by tracking these three factors, you will be
able to know what kind of money is being made and lost.

RE:
Financial
Bruce Burbank
Statements

9/5/2012 7:01:20 PM

Marie,
Your answer hits on several points I totally agree with, identifying those three
factors give valuable feedback into where any company is heading. Either
they're heading toward financial success or failure depending on business
plans and what is important. Good answer look forward to reading more of
your comments.

RE:
Financial
Amirah Howard
Statements

9/6/2012 8:17:13 AM

Great point, I agree with you those three factors help a company to see if they
need to revise something in the company to produce more or less.

Financial
Statements

Diangelo Miller

9/6/2012 7:14:28 PM

after class I believe the statement of retained earnings because it will show total net
income or profit that can be retained in the business after the dividends.

Financial
Statements

Dimitra Arrieta

9/6/2012 9:13:36 PM

After the explanation tonight I say its the statement of retained earnings because it
talks about profits that could have been retained after the dividends and total income.

RE:
Financial
Marie Roberts
Statements

9/7/2012 10:09:04 AM

Dimitra,
I have to agree with you that the Statement of Retained Earnings would best
show how a company is doing. This was my choice prior to class. After
attending class and having discussed the difference between the four financial
statements, I still feel this is a good choice. This statement gives insight to
what a company has "retained". In other words, it let's you know that out of
what a company earned since it started, how much of what was earned is still
in the company. In my opinion that is a good indication of how financially
stable a company may be.

Financial
Statements

Bruce Burbank

9/7/2012 8:02:30 PM

Professor Thomas did an excellent job in class of explaining the four different types of
statements, her explanations give me a since I may retain this information and be able
to successfully navigate this course. I'm sure I will have questions in the near future.

RE:
Financial
Quintavious Mapp
Statements

9/7/2012 9:30:19 PM

I totally agree. With data you can determine a lot of things with a company.

RE:
Financial
Dimitra Arrieta
Statements

9/8/2012 6:57:42 AM

Modified:9/8/2012 6:59 AM
Totally agree with you Bruce, Professor Thomas did an excellent job in class
in explaining the four different types of statements. Hopefully I will be able
to retain this information and be successfull myself with this course. I had
some experience in the past with some accounting so I hope I can remember
some of the things that I known and help me more with this course.

RE:
Financial
Diangelo Miller
Statements

9/8/2012 9:24:12 AM

I agree also I know I am going to have more questions cannot wait til the next
class

RE:
Financial
Professor Thomas
Statements

9/9/2012 12:13:27 PM

Thanks! I try to explain things in a way that it will make sense. Glad to hear
that it is working :)

Financial
Statements

Quintavious Mapp

9/7/2012 9:27:58 PM

I would say the statement of returned earnings because that data should determine a
persons decision to pick a stock and other financial problems.

RE:
Financial
Marie Roberts
Statements

9/9/2012 7:27:43 AM

I agree that the Statement of Retained Earnings will be a good resource to

help with a decision when you may want to invest in a company. This
statement will give you a good idea of how the company is performing. You
can get an idea of how well a company "retains" earnings.

RE:
Financial Quintavious Mapp
Statements

9/10/2012 9:26:14 PM

There are other statements that a person could use to determine an

investment on a company but I would go with the Retained Earnings
over any other sheet.

Other
Statements?

Professor Thomas

9/9/2012 12:15:58 PM

Looks like a lot of you would review the Statement of Retained Earnings. One
disadvantage of using this statement is that it only shows you a snapshot of what if the
company generated net income or net losses over the life of the company. This means
that you cannot get insight into if revenues are increasing over the years, if expenses
have went down, or if the company has enough cash to pay its debt.
Does anyone have thoughts on another financial statement that they would look at?

RE: Other
Statements? Edward Steward

9/10/2012 1:49:26 PM

Im sticking with cash flow, although depending on what information you

want to know about the company will depend on what statement you need to
look at.

RE: Other
Statements? Dimitra Arrieta

9/10/2012 9:49:25 AM

Maybe the cash flow statement because cash balances and forecasts the future of cash flow
and is the heart of many business decisions.

RE: Other
Statements? Amirah Howard

9/10/2012 10:11:24 AM

Consolidated Balance Sheet

RE: Other
Statements
?

Professor Thomas

9/10/2012 11:30:32 AM

Hi Amirah,
Any particular reason why you would suggest the balance sheet?

Financial
Statements

Marvalyn Richards

9/10/2012 9:13:40 PM

Financial Statements are the business documents that companies use to report the results of their
activities to various user groups, this could be managers, investors, regulatory agencies etc. (Financial
Accounting)

Statements

Quintavious Mapp

9/11/2012 3:06:59 PM

When choosing a company I would consider all the data that I can get on the company.
Like in class, we had multiple sheets on Delta.