Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 14

The information reflected on the financial statements allows its users to evaluate whether they want to become financially involved with the company. But the financial statement users cannot make educated decisions based solely on one set of financial statements. Here’s why:

 The income statement is finite in what it reflects. For example, it may report net income for the 12-month period ending December 31, 2021. This means any accounting transactions taking place prior to or after this 12-month window do not show up on the report.

 The statement of cash flows is also finite in nature, showing cash ins and outs only for the reporting period.

While the balance sheet shows results from the first day the company opens to the date on the balance sheet, it doesn’t provide a complete picture of the company’s operations. All three financial statements are needed to paint that picture.

Savvy financial statement users know that they need to compare several years’ worth of financial statements to get a true sense of business performance. Users employ tools such as ratios and measurements involving financial statement data (a topic I cover in Chapter 14) to evaluate the relative merit of one company over another by analyzing each company’s historic performance.