What is the use of Financial Statements? Why must the owner or manager of the business know hoe to interpret them? Why is it important to keep them up to date? Who uses them?

   1. The owners and managers use them to assess the operation of the business and to make sound decisions to maximize its value.

   2. Prospective buyers of the business need them to determine its true value and potential.

   3. Financial Institutions use them to evaluate the risk of granting loans or credit lines to the business.

   4. An insurance company needs them to Insure the investment.

   5. Shareholders need them to estimate their return and risk.

   6. Prospective investors use them to assess future return and risk.

   7. Suppliers use then to evaluate the credit worthiness of the business.

   8. Buyers use them to determine whether or not the business has the potential to satisfy a steady demand of goods or services.

In The following articles we are going to introduce the four basic financial statements - The Balance Sheet, The Income Statement, The Statement of Retained Earnings, and The Statement of Cash Flows.  Taken together, these statements give an accounting picture of the firm’s operations and financial position.