Sample Essay on Financial Statements

Financial Statements

TO: All Board of Directors Members

FROM: Charles Queen, Chief Executive Officer

SUBJECT: Current Financial Situation of the Georgian Bay General Hospital

This is to inform all members of the Board of Directors (BOD) about a meeting to discuss the financial situation of Georgian Bay General Hospital Scheduled on 12 February 2015 at 8:00 PM in the BOD Lounge. The success of any organization dictates a thorough analysis of the financial situation and making the necessary adjustments to rectify current financial problems. Our meeting will focus on the following financial statements:

  • Balance Sheet
  • Statement of Operations (Profit and Loss Account)
  • Statement of Cash Flows
  • Statement of Changes in Net Assets

Balance Sheet

This financial statement gives an overall picture of the financial situation of the business within a defined period (Gupta, 2009). This document contains resources, obligations, and value of shareholders’ worth. The assets designate what the organization owns; the liabilities indicate what the organization owes other external parties such as lenders and suppliers; and the owners’ equity represents the amount shareholders can claim after settlement of all liabilities should the business undergo liquidation (Stickney, 2010). Assets often fall under two categories; fixed assets-not easily transformable into cash within one trading period and current assets-easily translatable into cash within one trading period. Similarly, liabilities fall into two groups; short-term liabilities-the business must settle within a period of five years and long-term liabilities that the business may settle after five years (Dick & Missionier-Piera, 2010). Items on balance sheet are vital in computing various ratios that aid in assessment of financial performance of an organization.

Statement of Operations

This document reveals gross profit of a business from its processes. Statement of operations entails two major items, operating revenues, and operating expenses (Gupta, 2009). The difference between operating revenues and the operating expenses gives the gross profit or the gross loss that the business has enjoyed or suffered respectively (Dick & Missionier-Piera, 2010). In addition, excess or deficit of revenues, that is, net gain or net loss is the total sum from all operating lines of the business with items such as non-operating gains, gifts and other non-operating incomes inclusive.

Cash Flow Statement

This document shows direction of variations in cash amounts in a business (Dick & Missionier-Piera, 2010). More often, an organization receives income from its continuous operations, and from its outside investments (Gupta, 2009). On the other hand, business experiences cash outflows when it pays for business accomplishments and investments. Thus, cash flow statement features three categories of business events to illustrate movement of cash in an organization, operating, financing, and investing related actions.

Statement of Changes in Net Assets

This financial document gives the changes in net asset balances between current and prior periods (Stickney, 2010). The document indicates the manner in which the net assets of mutual funds have moved over the past two reporting times (Sinha & Sinha, 2009). In the overall computation of the net assets, it is crucial noting that net investment incomes and gains from investments from business operations add to net assets (Gupta, 2009). In addition, shares that an organization sells and reinvests increase value of net assets of a business. However, items such as shares that the organization redeems and the dividends it declares and pays to its shareholders reduce the value of net assets (Sinha & Sinha, 2009). Therefore, this statement reflects two components, net assets at commencement of the trading period, and net assets at the end of the trading time and the difference gives net assets for the year over that given trading time.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Dick, W., & Missionier-Piera, F. (2010). Wiley financial reporting under IFRS: A topic based approach. Chichester, West Sussex, UK: Wiley.

Gupta, A. (2009). Financial accounting for management: An analytical perspective. Delhi, India: Dorling Kindersley (India) Pvt.

Sinha, G., & Sinha, G. (2009). Financial statement analysis. New Delhi: PHI Learning Pvt Ltd.

Stickney, C. P. (2010). Financial accounting: An introduction to concepts, methods, and uses. Mason, OH: South-Western/Cengage Learning.