Respond to each classmate 100 words a piece
The income statement shows the income and expenses of an organization that produces a net income of financial gain or loss. The finding of financial gain or loss is reported on the company’s statement of changes in equity. This helps the organization keep track of their business progress and improve on areas of weakness in other to grow the business.
A balance sheet shows the organization’s assets, liabilities, and shareholder’s equity at a given time. It shows in detail the company’s income and expenses of business operations. This is a way of monitoring the progress of the organization and how they manage their resources and financial assets in achieving the best result.
The cash flow statement provides an accurate view of a firm’s overall liquidity by showing the cash transactions from business activities. This system is an expression of utilizing the financial resources in other to develop the company’s business objective. It reports every cash inflow and outflow within a given time. Scott Besley, Eugene F. Brigham. (2015). “People experienced in estimating equity capital cost recognize that both careful analysis and sound judgment are needed” (Pg. 455).
The statement of changes in equity is an organization’s income which includes the possibility of making a profit or loss within a given period. The purpose of this system is to furnish the company’s shareholders with the right information that has a positive impact on their investment strategy. This creates a solid framework where the company improves and gains more profit from its business operations.
The statement of changes in equity is then reported in the equity component of the company’s balance sheet. This method shows the balance sheet within current assets. It is transferred as the ending cash balance on the cash flow statement.
Valuation is the process of assigning value. In the case of this discussion question, value is being assigned to investments like equity and bonds based on how much profit these investments can return. All of this effects the decision making of company’s leaders. From a secular point-of-view, whatever brings in the most profit, is the decision that should be made. However, from a Christian Worldview, more than profits should be considered. In 1 Timothy, Chapter 6, it is written “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” (KJV) Money is needed, but it is not to be loved so much that it is put before God and his good works. Therefore, when making investment decisions, company leaders should not only look at the return on investment to assign value, but also consider what good the investment would do for the community it would serve. No matter how much profit the investment would bring in, but; would it be pleasing to God. With these thoughts in mind, leaders should proceed with assigning its value.
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