Financial Data of Each Company Term Paper

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By adding up the two figures one obtains the company's total net worth. The basic rule of a balance sheet is that the assets on one side have to add up to the same amount as the liabilities and the owners' equity combined, on the other side.

Investors need to know the contents of a balance sheet because important financial ratios may be calculated with the data therein. These ratios help at building a picture about the state of liquidity and growth potential of the company in question.

Another example of financial statement is the cash-flow statement, which reveals all sources and uses of a company's money during a specified period. The sources of cash include revenues, long-term financing, sales of non-current assets, increases in current liability accounts or decreases in current asset accounts. The uses included operating losses, debt repayment, equipment purchases and increases in current asset accounts.

The financial operations of a company have to be kept under strict observation. Investors need to know exactly what is the position of the company, so an objective opinion is required. This is where the auditors come in. Auditing may be defined as "a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events of an economic entity to ascertain the degree of correspondence between assertions and established criteria and communicating the results to users.

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" Of course that auditing is an expensive operation, but the safety it brings makes it worth the effort. Auditing is mandatory for certain companies, especially when the interests of a large number of people are at stake.

Please find below the links to simplified copies of Yahoo!'s income statement and balance sheet. The elements discussed above may be easily identified here. Yahoo! is one of the most dynamic companies and this is why I have chosen it, although, as I have mentioned, financial statements are fairly similar between companies. http://quicktake.morningstar.com/Stock/balance10.asp?Country=USA&Symbol=YHOO&stocktab=finance http://quicktake.morningstar.com/Stock/Income10.asp?Country=USA&Symbol=YHOO&stocktab=finance

Reference:

1. Information on Financial Statements and Audit www.investopedia.com www.allbusiness.com/articles/content/17951.asp www.anderson.ucla.edu/course/2004-2005/fa12301/download/Intro_to_audit.pdf

2. Yahoo!'s financial statements www.morningstar.com.....

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