Essay: Income Statement

Sample Essay

The income statement included in the financial statement is quite informative as it provides information regarding revenues earned, expenses incurred and net income of a company which is then used to calculate the earnings per share. Income statements are highly manipulative and companies can significantly affect the net income reported on the income statement by several means to make them more attractive to current and potential investors. It has been suggested by researchers that net income a mere opinion but cash flows are factual and important (Fernandez, 2008).

This manipulation causes the amounts reported on the income statement to differ significantly from actual performance of the company. The statement of cash flows on the other hand provides more reliable and relevant information to investors to make useful decisions. There is a very low probability of manipulation of values in the statement of cash flows as it reflects the actual inflow and outflow of cash in an organization.

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