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Financial Statements: Basics and Purposes

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Explain the purpose of each of the 4 basic financial statements? How do managers and employees use them? How about investors and creditors?

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Solution Summary

Your tutorial is 246 words and describes the four basic financial statements and gives examples of how managers, employees, creditor and investors may use the financial statements.

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1. Balance sheet
Purpose: To show the economic resources (assets), liabilities and the net (equity) at a point in time.

2. Income Statement
Purpose: To show if the revenues of the period exceed the expenses of the period (profit) or not.

3. Statement of Cash Flow
Purpose: To show the sources and uses of cash, sorted by operating, investing and financing activities.

4. Statement of ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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