Basic Financial Statements for Marketing and Sales Executives
The financial reports are prepared to know the status of the company. It is distributed to shareholders, partners, employees, government and other associated parties. The management ensures to prepare the report with utmost care and perfection. As it is sent outside the company, there should not be any errors, fake information or false reports as these would totally affect the reputation and the company name.
The major financial statements are income statement, cash flow statement, shareholder’s equity statement and balance sheet. Let us discuss these basic statements in detail.
Income statement: This is one of the important statements that show the status and running condition of the company. The investors view income statement to decide whether the company is running in a profit or loss condition. You can calculate the yearly turnover of the company by viewing the income statement.
The management uses the income statement to conclude whether their business operations are running in a profitable manner. They would take necessary changes or cut down expenses where their income is getting affected. The income statement clearly highlights the expenses occurred and revenue earned for a particular period. It is prepared in monthly, quarterly and yearly basis.
Cash flow statement: The cash flow statement would be divided into three sections. It includes financing activities, investment activities, and operating activities. It explains the changes made in a particular time. Moreover, you can get a brief knowledge about what transactions have been made, what you need to pay and how much your clients have to pay. It is the blueprint of the organization’s cash flow system.
Shareholder’s equity statement: It highlights the changes in shareholder’s equity for a particular period. Some of the common changes will include dividends declared, comprehensive income, treasury stock purchase, and net income. If you are an investor in share market, you will receive a consolidated statement highlighting the changes and earnings of the company. You need to read the report on subdivisions like share capital, retained earnings, legal reserves, subtotal, minority interests and total equity. These will be sent to investors on half yearly or yearly basis.
Balance sheet: The balance sheet mentions about the stockholder’s equity, assets, and liabilities. It will be grouped into two categories as the current liabilities and the current assets. The balance sheet will be prepared on either yearly basis or financial year basis which helps the investor to know about the company’s current ratio and working capital.
These financial statements are prepared by following certain accounting rules and conditions. It helps the company to compare their records with previous year’s earnings or their competitors. Most companies also prepare an income statement with the balance sheet.
The income statement records taxes, profit, cost involved and sales revenues of the business. They are recorded on a monthly basis and maintained as a yearly record. When you compare for three months, the quarterly income statement, you would know what prices have been increased. It gives clear details and serves great to make plans. Investors view this statement to know about profit margin, fixed sales and fixed income.