Analysis of Financial Statements

Abstract

This paper talks about how a balance sheet is an important financial statement. The balance sheet can be applied to every day life. The balance sheet can be used to help somebody see they ways that they have made financial decisions in their lives. The balance sheet also helps businesses function. A business manger uses the balance sheet to make important decisions. These decisions help the business run functionally. With out a balance sheet the business manager’s decisions become harder. Companies need to understand what the financial documents are telling them.

Application of Financial Statement

Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life.

A balance sheet is a financial statement that summarizes a company’s assets, liabilities and shareholder’s equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well ad the amount invested by the shareholders. A balance sheet can be applied to everyday life by allowing a person to get a quick handle on the financial strength and capabilities of their life. If a person keeps a balance sheet they are able see what steps they need to take in their personal lives. The balance sheet will allow the person see if they are overspending on credit compared to paying cash to purchase goods. The balance sheet can help somebody decide if they really need the item that they want to purchase. By keeping a balance sheet it is able to determine if to much spending has happened. A balance sheet can show if somebody is financially in trouble. If a balance sheet is kept, the net equity is able to be determined. If the person takes the assets that they have and subtract the liabilities they can determine