Accounting and Finance: Financial Statements, Ratios, and Cash Flow Management

Running head: ACCOUNTING AND FINANCE
Accounting and finance
Name of the student
Name of the university
Author note

1ACCOUNTING AND FINANCE
Table of Contents
Part 1..........................................................................................................................................2
Question 1..................................................................................................................................2
General purpose of financial statements................................................................................2
Question 2..................................................................................................................................3
i. Concern areas for financial performances – income statement......................................3
ii. Concern areas for financial health – Ratios....................................................................3
iii. Concern areas for cash flow management – Cash flow statement..................................4
Question 3..................................................................................................................................5
Reference....................................................................................................................................7

2ACCOUNTING AND FINANCE
Part 1
Question 1
General purpose of financial statements
The income statement – it shows the way in which the business earns profit or makes losses
over the specific financial period, generally a financial year. Home Range Ltd. can use the
income statement to summarize the transactions associated with –
 Expenses – the income statement reveals the summarised list of cost expensed for
generating the income (Nobes 2014)
 Income – it shows the income that is shown through different terms by different
businesses like revenue, sales, earnings, fees and gross profits.
Balance sheet – to assess the status of the business at particular time, user can look into the
information included in the balance sheet. The balance sheet assist is finding various answers
like the worth of the business, the way business can pay its bills and how the owners can be
benefitted from the earned profits. The balance sheet reveals the list of the financial resources
generally called as assets and the financial obligations generally called as liabilities. The net
worth can also be found from the balance sheet through deducting the liabilities from the
assets (Henderson et al. 2015).
Cash flow statement – like income statement, the cash flow statement also covers the
particular period of time and acts as the bridge among 2 balance sheets. The cash flow
statement states the changes in the resources of cash from the business through revealing the
way cash is generated and utilised under various activities like operating activities,
investment activities and financing activities (Baker and Haslem 2015).