Area of uses of funds

- Repayment of long-term loans
- Purchase of fixed assets
- Payment of cash dividend
- Decrease in liability or equity
- Increase in working capital
- Purchase of long-term investment.

Source of cash

- Increase in liability or equity
- Funds from operations
- Issue of shares and debentures
- Sales of fixed and long term investment
- Decrease in working capital
- Income from investment.

Importance of Financial Statement

- Historical record
- Course of action
-Reliable financial information-economic resources and obligations.
- Estimating the earnings potential of the enterprise.
- Providing information about economic resources and obligations.
etc.

The statement of Retained Earning

A statement reporting the change in the firm's retained earnings as the result of the income generated and retained during the year. The balance sheet figure for retained earnings is the sum of the earnings retained for each year the firm has been in business. Retained earnings are used to expand the business but not used for the payment of dividends or anything else.

The Balance sheet

The balance sheet is that financial statement which shows financial position of a firm at a specific point of time.

Income statement

The income statement is also known as profit and loss account. It presents the result of business operations during a specified period of time such as, a quarter of a year. In other words, it summarizes the firm's revenues and expenses over an accounting period.

Common size statement

Common size statement is also known as common size analysis. It is another technique of analyzing the items of financial statements on relative terms. This technique is based  on the calculation of the percentage of every item in the income statements and balance sheets for past several years. It helps to check the performance trend of each item during the period under analysis.
The common size analysis is carried out for a period of one or more years. The income statement items are divided by total assets and expressed as a percentage of total assets. These percentages calculated in the same manner for the industry, and the competitors. Thus, the comparison shows the company's performance relative to industry, competitors as well as compared to its own past record.