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Financial Statements: Example Problem

Discuss the use of the financial statements in the determination of cash flow. Why are we concerned about their differences if we ultimately are concerned about the profitability of the firm which is demonstrated by the financial statements of the firm?

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Dear student,

Discuss the use of the financial statements in the determination of cash flow. Why are we concerned about their differences if we ultimately are concerned about the profitability of the firm which is demonstrated by the financial statements of the firm?
Respond

Financial statements of the company are profit and loss account, balance sheet and statement of retained earnings and cash flow statement.
1. Balance sheet shows the financial position of the company on a particular date usually at the end of the particular financial year. Balance sheet informs us the amount of fixed assets, current assets, investments made, amount of shareholders' equity, long term debt and current liabilities of the company.
2. Income statement shows the financial results of the company for the particular financial year. It shows the profit or loss of the company for the particular financial ...

Solution Summary

This solution discusses the use of financial statements in the determination of cash flow. The probability of the firms which is demonstrated by the financial statements of the firm are determined.

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