FINC 301 Chapter Notes - Chapter 3: Operating Cash Flow, Retained Earnings, Cash Flow
Document Summary
The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, and statement of cash flows. Accountants translate physical quantities into numbers when they construct the financial statements. The numbers shown on balance sheets generally represent historical costs. When examining a set of financial statements, one should keep in mind the physical reality that lies behind the numbers, and the fact that the translation from physical assets to numbers is far from precise. No, because the million of retained earnings would probably not be held as cash. The retained earnings figure represents the reinvestment of earnings by the firm. Consequently, the million would be an investment in all of the firm"s assets. The balance sheet shows the firm"s financial position on a specific date, for example, It shows each account balance at that particular point in time.
