Financial Statements Paper Part I

In: Business and Management

Submitted By frivera12
Words 1114
Pages 5
Week 2 Assignment
Frances Emanuel
ACC/497 – Advanced Topics in Accounting Research
July 23, 2012
Robert Davis

While reviewing Home Depot’s 2008 Annual Report, there are a lot of questions that can be answered. Questions regarding what the income statement includes, what it says about Home Depot, why it is important, and what decisions can be made from the financial statement. The same can be answered about both the balance sheet and the statement of cash flows as well. Each financial statement is important and useful in its own way and all of the three financial statements are beneficial for management within Home Depot. According to “Beginners’ Guide to Financial Statements” (2007), “an income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year)”. There are two different types of income statements, single and multiple and Home Depot uses the multiple-step income statement. With that being said, this income statement includes both operating expenses as well as non-operating expenses. By reviewing the income statement for Home Depot, it looks as though net sales, cost of sales, and gross profit have all decreased over the latest three years recorded. On another note the operating expenses and non-operating expenses have both increased over the latest three years.
“The income statement shows revenues, expenses, gains, and losses; it does not show cash receipts (money you receive) nor cash disbursements (money you pay out)” (Income Statement (Profit and Loss Statement), 2012). The income statement is important to many individuals including bankers/lenders/creditors as well as management. Paying attention to Home Depot’s profitability will assure that there will be a financial profit and that creditors would not be hesitant to provide additional credit when needed. With…...

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