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PF Chapter - 02

The document outlines the major sources of financial information for a firm, primarily focusing on the Annual Report, which includes a verbal section and a quantitative section. The quantitative section presents four key financial statements: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows, each serving distinct purposes in assessing the firm's financial health. These statements provide insights into the firm's assets, liabilities, equity, revenues, expenses, and cash flow activities.

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14 views9 pages

PF Chapter - 02

The document outlines the major sources of financial information for a firm, primarily focusing on the Annual Report, which includes a verbal section and a quantitative section. The quantitative section presents four key financial statements: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows, each serving distinct purposes in assessing the firm's financial health. These statements provide insights into the firm's assets, liabilities, equity, revenues, expenses, and cash flow activities.

Uploaded by

rafidmahbub2004
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FINANCIAL STATEMENTS AND

REPORTS
By Kaniz Fatema
Lecturer, Finance, AIBA
The major sources of information of the firm’s are-
Annual Report-
A report annually issued by the corporation to its
stockholders that gives the accounting pictures of the firm’s
operating and financial position called the annual report.
Two section:
1. Verbal section-
Verbal section is often presented as a letter from president
that describe the operating result of the corporation during
past few years (2-3 years) and discussion the new
development that will affect the firm future prospects.
2. Quantitative section-
It presents four basic financial statements:
 Balance Sheet

 Income Statement

Statement of retain earnings

Statement of cash flows


 Balance Sheet
Balance Sheet is financial statement that shows the
financial position of a corporation at a specific point in time
( 31st December, 2018). Assets must be equal to liabilities
and owners equity.

Assets= Liabilities + Owners Equity

Assets- Items owned by the corporation


Liabilities- Any claims against corporation by non-owners
Owners equity- Funs supplies by the owners
 Income Statement
It is a statement that summarized the revenues and
expenses during an accounting period.
Revenues- Defined as the proceeds realized from selling
the main product/services of the firms.
Expenses- Expired costs are called expenses.
Net Sales xx
(-)Cost of good sold xx
Gross income xx
(-)Operating expenses xx
Operating profit (EBIT) xx
(-) Interest xx
(-) Taxes x x
Net income x x
 Statement of retain earnings
It is the statement that reports how much earnings are
retained in the firm rather than paid out as dividend. It also
prepared for year ending.
Statement of Cash flows
It shows the impact of operating, investing and financing
activities on the cash flows of the corporation over an
accounting period.
 Operating activities- It includes net income, depreciation
and changes in the firm current assets and liabilities.
 Investing activities- It includes the invest in or sales of
fixed assets.
 Financing activities- It includes cash raised and used
during the year.

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