Introduction to Business Accounting Essay Example | Topics and Well Written Essays - 1250 words - 1

Introduction to Business Accounting - Essay ExampleSecondly, there are different slipway of calculating same ratios, which makes the comparison difficult, and interpretation is subjective too (Wiley 1998). This is important as comparison surrounded by companies and industries becomes difficult as they use different definitions of accounting items, which are part of the financial ratio analysis. Thirdly, when pains analysis is done using ratio analysis then it is often difficult to define the hatful of companies that may be considered to be in direct competition with the party and thus makes comparison quite an subjective. Fourthly, there are some financial elements, which are based on estimations and thus can refer the outcome of ratio analysis. Finally, difference in accounting standards and policies of companies and country of origins makes the comparison difficult (Keown, et al. 2005).The Income Statement provides breeding regarding the companys performance over an account ing period (Dodge 1997). It provides details of the revenues sufferd by business and cost of operations to generate those revenues. The different between revenue and cost of sales is referred to as gross profit. Moreover, it provides selective information regarding expenses incurred by the company over the period, which may be variable or fixed in relation to the revenues generated. After implication of expenses from the gross profit from operations or profit before interest and tax is derived. The next information element that the income statement provides is the amount of interest paid by the company in lieu of its debt obligations. thus the tax amount is disclosed which is deducted from profit amount to arrive at profits from continuing operations. any receipt or payment related to extraordinary items activities is added or subtracted to derive net profit traceable to common shareholders and minority shareholders. It also gives information related