Prompt:Managerswithin the firm, as well as the firm’s owners and lenders, keep track of thefirm’s performance by reviewing its financial statements - income statement,balance sheet, and statement of...

Income Statement
The financial statement which gives detailed information on the company’s income and expenditures is called the income statement of the company (Stern 1997).
Purpose
An income statement is one of the most important financial statements, as it helps in doing the following:
· Display the details of income and expenditure of the company
· Determine if the company is making a profit or loss
· Provides a detailed view of all the income and expenditure that the company is making
Another use of an income statement is that it helps the investor to analyze the profitability of the company to determine if he/she wants to invest in the company or not.
Major types of expenses
Overall, an income statement provides a detailed overview of all the expenses which are incu
ed by a company but talking about the major expenses which are part of the company’s income statement are:
· Cost of goods sold: All the expenses which the company incur in acquiring the goods of the company come under the cost of goods sold section of the company
· Operating expenses: Operating expenses are all the expenses related to the operating activities of the company
· Selling and Administrative expenses: This includes all the expenses related to selling, like advertising, and administrative expenses like depreciation
· Financial expenses: Any financing-related expenses come under this section, like the interest expenses
· Any extraordinary expenses
· Non-operating expenses
Balance sheet
A detailed view of the company’s financial standing, i.e., the company’s assets and liabilities are something which the balance sheet provides (Friedman 1975).
Purpose
The balance sheet is an...