Introduction
This paper was devised to give small business owners an insight to the financial statement
and managerial reports that are essential for business. The financial statement consists of
an income statement, balance sheet and statement of cash flow. This paper will provided an
explanation of proper financial accounting and ethical business decisions making
techniques.
Audiences, Purposes and Nature of Financial Statement
Business owners, CEO and managers are among those who are the important decision
makers of their companies. To make these important decisions many pieces of information
are needed. The financial operation of any business is one of the most important aspects of
business management. Some of the most important tools available to managers today are
financial statements and managerial reports. The business managers basic knowledge and
understanding of these reports are essential in the decision making process. Three types of
financial statements that are relative to business, the income statement, balance sheet and
statement of cash flow. These three statements provide key information on the overall
health of a business. The first type of financial statement is the income statement, is the
major device for measuring the profitability of a firm over a period of time. (Block-Hirt, p.
25). They are in a stair-step or progression form from top to bottom, with sales at the top
and subtract the cost of goods to determine the gross profits. Next subtract the selling and
administrative expenses to determine the profits or losses of the business. Then other
administrative expenses are subtracted to determine what the company has earned. The
