Larissa Galberth
Financial Statements Paper Part 1
University of Phoenix
ACC/497 Bob Davis

Proper interpretation of the information found in a company’s financial statements is vital for everyone affected by the actions of the company. Those affected include potential investors and current stakeholders, including stockholders, employees, vendors and lenders. All of these people must be able to make business decisions based on information found in financial statements. This paper will identify the purpose of financial statements based on the information found within the financial statements of the Home Depot.
What does the income statement tell you about the company? Why is the statement important? What business decisions could be made using the income statement? Often referred to as the profit and loss statement an income statement is a document used for determining profitability. It shows a company’s revenue, gross margin, operating expenses, total expenses and net income. Shareholders continuously inspect the income statement of companies in which they have invested interest to ensure that their investment remains strong and profitable. The Home Depot 2008 income statement shows that this is a company with strong sales with $70 million in sales per year. Although the Home Depot is a strong sales company the income statement shows that there was a substantial drop in sales in 2009 as opposed to previous years. This statement is important to investors and lenders. Seeing the drop in revenue and net income from 2008 to 2009 is not an appealing aspect to investors and lenders. This is because it shows that the Home Depot had a lack of profitability during the year. Based on the Home Depot’s ability to earn money for their shareholders in 2009 investing in this company may not sound like a good business decision. This can also be backed by the evident fact