Accounting study

An Income Statement is the financial statement that contains the result of the company 's operations for a certain period , whether it 's a month a quarter or a year . It enumerates the different income it received during the year , as well as the corresponding expenses incurred to earn them . Aside from the results of operations , an income statement also contains revenue and expenses for its non-operating activities . An Income Statement is a good tool to determine the company 's performance for any given period , whether in comparison with a prepared budget

forecast or prior period performance

A Balance Sheet is a financial statement that contains the assets liabilities and owners ' or stockholders ' equity as of a certain date Under the double-entry method , the balance sheet follows a basic equation . Asset is equals to liabilities and owners or stockholders equity . A Balance Sheet can help investors , debtors and other stakeholders determine the company 's liquidity and solvency . Together with the company 's income statement , it can also be used to analyze how efficiently and effectively the company uses its assets in its operations

A Cash Flow Statement is a financial statement that contains the use and receipt of cash by the company . It is divided into three , each segment highlighting the operating , investing and financing activities of the company . A Cash Flow Statement is used by the different stakeholders to determine how the company receives and uses its cash asset

A Budget is a plan containing a projection of income for a certain future period and their corresponding expenses . A Budget is a useful tool in monitoring the company 's performance in its operating activities

A Ratio Analysis is the use of financial ratios to determine the performance and financial situation of a company in a certain period The company 's financial ratios can be compared with determined acceptable ratios in the industry , the financial ratios of known competitors or with the company 's own financial ratios from previous years . Financial ratios can also be used to determine a trend in the industry or in the company and in the creation of a budget

The five different classifications of ratio are liquidity , asset turnover ratio , financial leverage ratio , profitability and dividend policy ratio (Financial ratios , n .d . These ratios provide different information and are relevant to different users of the financial statements

Liquidity ratios are used to determine the company 's ability to meet short term liability . These ratios are important to company suppliers and other creditors with short-term liability . Liquidity ratios include working capital ratio , quick ratio and cash ratio . These ratios are computed as follows

Working Capital Ratio Current Assets Current Liabilities Quick Ratio Current Assets - Inventory Current Liabilities Cash Ratio Current Assets Marketable Securities Current Liabilities Asset turnover ratios are used to determine the company 's efficiency in using its assets . These ratios include receivables turnover and inventory turnover . These ratios are computed as follows

Receivables Turnover Annual Credit Sales Accounts Receivable Inventory Turnover Cost of Goods...