< Back to Assignment Attempts: Average: /3 1. Financial statements and reports What happened to assets, earnings, dividends, and cash flows during the financial year? Accounting practice in the United States follows the generally accepted accounting principles (GAAP) developed by the Financial Accounting Standards Board (FASB), which is a nongovernmental, professional standards body that monitors accounting practices and evaluates controversial issues. The Securities and Exchange Commission (SEC) requires all publicly traded companies to periodically report their financial information. A publicly held corporation must publish an annual report that contains the balance sheet, income statement, statement of cash flows, statement of stockholders' equity, and other financial information for analysis. The following table lists descriptions of the major financial statements and reports that a firm publishes. Identify the correct statement or report for each description. Description Is divided into two important parts: operating and non-operating sections; also known as the profit and loss statement. Gives details about the company's cash at the beginning of the year and what is left at the end of the year, including some details about where cash was generated and where it was used during the course of the year. Reconciles (1) the amount of stockholders' equity recorded at the beginning of the reporting period, (2) changes during that period, and (3) the amount of stockholders' equity at the end of the reporting period. Provides a quantitative summary of a company's assets, liabilities, and net worth at a specific point in time. Is published once a year and provides stockholders with details about the company's performance and financial condition. Statement or Report Annual report Statement of stockholders' equity Statement of cash flows Balance sheet Income statement Accountants focus on creating financial statements, whereas finance professionals use these statements to evaluate a firm and answer questions about its performance. Indicate which financial statement you would refer to when answering the questions in the following table: Statement of Stockholders' Income Statement Equity How profitable has the firm been? How much of the firm's earnings are left as balance after the firm pays out dividends to its shareholders? The annual report is very important for investors, because the information contained in the annual report: helps investors forecast expected earnings and dividends. shows the prices at which each investor purchased the company's stocks and bonds. Grade It Now Save & Continue Continue without saving