The financial statements prepared by companies yield the same benefits as the financial disclosures provided by mortgage applicants. Financial statement information provides potential lenders and investors with a reliable basis for evaluating the past performance and future prospects of a company. Because financial statements are used by so many different groups (investors, creditors, managers, etc.), they are sometimes called general-purpose financial statements. The three primary financial statements are the balance sheet, the income statement, and the statement of cash flows. These statements provide answers to the following questions:

1. What is the company’s current financial status?

2. What were the company’s operating results for the period?

3. How did the company obtain and use cash during the period?

To adequately answer the question of how a company is doing, one must have a working knowledge of financial statements. In this course, you learn that the financial statements are summary reports that show how a business is doing and what its successes and failures are. The financial statements covered in this course are the same as those used every day by millions of business owners, investors, and creditors to evaluate how well or poorly organizations are doing.

Hopefully, you come away from this course convinced that the purpose of accounting is not to fill out dull reports that are then filed away in dusty cabinets, but rather to prepare summary financial performance measures to be used as the basis for thousands of economic decisions every day.