Discuss the importance of financial statements and how they are used by businesses.

Assignment 2 Excel and microsoft Due 01/03

Businesses use financial statements to measure and track their financial performance. They provide valuable information such as detailed insights into a company’s income and expenses, helping to inform decisions made in regards to the allocation of resources going forward. Investors also benefit from financial statements, which allow them to analyse the performance of previous entities.

A basic income statement is composed of two major sections. They are revenue/gains/losses. The revenue section refers to income from the primary operation (sales/services), while gains is any profit derived through investment or other activities.

Expenses on the other hand refer to costs associated with running the business – both direct (costs related directly with producing goods or services) and indirect (rent, salaries etc.) These expenses should be included in the calculation of total net profits during the specified period.

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