FINANCIAL ANALYSIS

Financial Analysis

[Name of the Institute]

Financial Analysis

Introduction

The following paper contains a brief discussion about the purpose and importance of financial statements. The following paper will also discuss about the financial ratios of the (GlaxoSmith Kline) GSK which will provide an interpretation on the financial health of the firm. It will also highlight the interpretation of the cash flow statement of GSK. In the end of the paper the following paper will briefly highlights the financial position of the firm.

Discussion

Part A

Purpose of Financial Statement

The financial statement for instance the income statement and the balance sheets provide an overview of the financial health of the firm. The stakeholders, investors, banks employees or anyone who are interested in the firm can also review such reports and they can determine how much the money is coming in and out of the business, the types of expenses the business has and also profitability of the business is determined. If the business or the firm is applying for the loan to bank then there is requirement of financial statements due to which the bank can evaluate the financial health and provide loan accordingly. On the other hand if the financial health of the firm is better than the investor will also invest in the business. These financial statements provides an investor's the degree of financial risk on the basis of which the investor may be get attracted to invest in the business or to reject consideration to invest in the firm (Ravisankar, 2011).

Income Statement

The income statement is sometimes also called as the profit or loss account which gives clear picture of money made by the firm or the cash generated by the firm in given period of time. The income statement starts with the money the firm has generated through sales while subtracting it from all the over head expenses such as the cost associated with the supplies, office rental and payroll, that firm has incurred during the specific period of time. In the income statement the expenses such as depreciation are also subtracted or any other item that has been returned. After deducting all the expenses from the net sales the income or the profit and the net loss for the particular period of time is calculated.

Balance Sheet

The balance sheet is also called as the statement of financial position. The balance sheet shows the assets, liabilities and the shareholder's equity of the business. The asset is anything that has some particular value, for instance the real estate, equipments, and the cash in bank account. The liabilities are money that the business owes other for instance the property or the mortgage expenses or the balance of debt or the loan to the supplier. Accrued taxes and expenses for the payroll that the business owes are also liabilities. The shareholders equity is the difference between the assets and the liabilities of the firm, whatever would be left over for repayment to the original investors. In the case of sole proprietorship the equity is the amount ...