Financial Statements the Income Statement and the Essay

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Financial Statements

The income statement and the balance sheet are some of the most commonly used financial statements, both at a personal and corporate level. In this text, I concern myself with how I can utilize the balance sheet in my day-to-day life. Further, I look at how a business manager could benefit by having a comprehensive understanding of this crucial financial statement. Lastly, I discuss how I may apply both the income statement and the balance sheet in a future position.

The Balance Sheet and its Application in My Day to Day Life

According to Eisen (2007), a balance sheet is basically a financial statement that charts an entity's financial position at a specific point in time. It is mainly made up of three sections namely the assets section, the liabilities section and lastly the owner's equity section. In my own opinion, the balance sheet could come in handy in terms of application to quite a number of issues in my life. To begin with, it is possible to determine my net worth using a balance sheet.

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This can be achieved by first coming up with a personal balance sheet with a list of all my liabilities and assets. My net worth in this case is the difference between my total assets and my total liabilities. Knowing my net worth is critical for purposes of determining whether my emergency funds are adequate etc. Secondly, a balance sheet could help me to determine my level of debt. Knowing my debt level is important as I can be able to tell when acquisition of additional debt is inappropriate.

The Balance Sheet and How its Understanding Could Benefit a Business Manager

To begin with, a manager's comprehensive understanding of this financial statement is important for comparative purposes. Here, the business manager could make an assessment of both the strength and the performance of the business going forward through carrying out a comparison of the business' balance sheets over time (say over a period of 5 years). Further, a business manager can chart the….....

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