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There Are Some Uses Of Income Statements For Investors And Creditors

Profit and loss in a company are like two different sides of a coin. Both become the most tangible benchmarks to determine the performance of a company in the form of financial statements. One part of the financial statements is the income statement. Well, what distinguishes the income statement with other types of financial statements is the period that is fairly flexible, and the contents of the different reports. Additionally, if you want to ensure the accuracy of your financial statement data, we recommend you hire Bookkeeping Services Parramatta.

As expected, the income statement certainly contains all revenues and expenses, which at the end of the conclusion produces a profit or loss value. This report is used to determine the company’s activities experienced profit or loss in a certain period.

Because it is always updated every specified period, the income statement updates the change in financial position in one period from the results of the company’s activities.

Implicitly, the income statement contains information on gross profit, operations, and net income. Through these details, it will make it easier for shareholders, employees, creditors, to the public to measure the efficiency of the management of the company.

In terms of investors and creditors, the income statement has the following uses.

1. Evaluate the company’s performance in the previous period

Investors and creditors are very concerned and carefully examine the income, costs of the company. They also often assess whether the company’s performance is satisfactory or not by comparing it with its competitors.

2. As a basis for predicting future performance

Information on past performance can be used to help determine current trends. As well as providing an overview of future performance both in terms of profit and cash flow.

3. Helps assess risk or not necessarily reach future cash flows

In the income statement, information on earnings, income, costs, and losses can describe the risk at a certain level in the future.