Purpose of Income Statement
The purpose of an income statement is to convey to interested stakeholders the level of income that the company has. In general, financial statements are used to provide a consistent method of presenting financial information that is used by creditors and investors to learn more about the financial health of the company. The income statement focuses on the revenues and costs that the company has in its operations, telling the reader about the company’s ability to earn a profit (Accounting Tools, 2018).
The income statement can be evaluated on its own, but because it covers a particular time period, it also has value in conveying information across multiple time periods. A growing business, for example, will have that growth illustrated in its income statement, as its income and costs will grow over time. The income statement is therefore a valuable tool for regulators as well – it is a key source of information that could highlight accounting fraud, because there are many components of the income statement that are used by tax and regulatory authorities to determine the financial health and tax burden of the company.
Assessing an Income Statement
There are a number of different ways to analyze an income statement. Often, such analysis will be done over the course of multiple time periods, as this helps to better assess trends in a company’s income or its profitability. The first means is by compiling a vertical income statement, which compares...
References
Accounting Tools (2018) The purpose of financial statements
Brenner, L. (2016) The purpose of the balance sheet and income statement. Houston Chronicle. http://smallbusiness.chron.com/purpose-balance-sheet-income-statement-61847.html
CSI Market (2018). Auto and truck manufacturers’ industry revenue growth rates. CSI Market. Retrieved June 26, 2018 from https://csimarket.com/Industry/industry_growth_rates.php?ind=404&hist=20
Ford Motor Company 2012 Annual Report. In possession of the author.
Based on the data presented in the Table 2, it is revealed that Ford is a company that is good for the investment opportunity. The profitability ratios are one of the key ratios to determine the financial health of a company. Based on the data in Table 2, Ford Company demonstrates the increase in the profitability ratios between 2008 and 2011. For example, the ROA increase from the loss of
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The economic environment is difficult. The United States may finally be showing signs of emerging from recession, but the recent economic difficulty has taken its toll of Ford. Following the short-lived spike provided by the 'cash for clunkers' program, auto sales have slumped again. Many competitors saw sales fall dramatically in the wake of that program. Ford, however, did not suffer as much. While two of its most popular models,
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Marketing Plan for Ford Motors Company The logic is really very simple -- when a model is supposed to be for women, it has to be designed by women. It is clear that cars are now being purchased in USA for both men and women, and many times, women have their own cars. This fact had been realized as early as 1956 when there was a model called Dodge La Femme for
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