a friend has recently decided to invest in a company and has been advised to look at the annual report and accounts of the company to assess how financially healthy the company is before investing.
she is now asked you for advice in understanding the consolidated income statement and statement of financial position.
In 500 words, describe to her in lay- person terms the content and purpose of these two statements and also guide her as to how to use the information and any drawbacks in using this information as a sole reference point before investing.
FINANCIAL STATEMENTS By Course Name Professor’s Name University State (City) Date of Submission Financial Statements Financial statements indicate the overall financial health of a company (Fridson & Alvarez, 2011). As a result, potential investors use them while making economic decisions. Statement of Financial Position/Balance Sheet The contents of the balance sheet include equity items, assets, and liabilities (Fridson & Alvarez, 2011). The assets and liabilities may be divided into non-current and current liabilities/assets. Current assets are expected to remain in the business for not more than one year. Examples include office furniture, land and motor vehicles.