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Financial statements are most important statements of accounting. Accountants summarize this information in a balance sheet, income statement, and statement of cash flows. The statement of cash flows provides information about cash receipts and cash payments of an entity during a period. A secondary objective is to provide information about the operating investing and financing activities of the entity during the period.
We know a great deal about the company that is valuable by assessing its future cash flows. Balance sheet contains Assets and Liabilities as it gives the snapshot of the organization. Income statement contains all the revenues and expenses and finally they determine the profitability of the organization. Cash flow statement determines the cash flow position of the organization. As the balance sheet, income statement, and statement of cash flows are derived from the same underlying financial information, they are said to "articulate," meaning that they relate closely to each other. Balance sheet portrays the picture of the organization on a particular date. Income statement discloses the performance of the organization. It tells about the profitability of the organization. Thus financial statements are useful tools for evaluating both profitability and liquidity. Used separately, or in combination, the income statement, cash flow statement and balance sheet help interested parties to measure a company's current financial performance, and to forecast its profit and cash flow potential.
Case of Home Depot
Founded in 1978, The Home Depot (Retail) is the world's largest home improvement specialty retailer and the second largest retailer in the United States, with fiscal 2005 sales of $81.5 billion. The company employs approximately 345,000 associates and has 2,056 stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, 10 Canadian provinces ...
This solution is comprised of a detailed explanation to describe the financial data found in the company's financial statements, including footnotes.