Title: An Introduction to Financial Statements for the Practicing Lawyer
Abstract: AN INTRODUCTION TO FINANCIAL STATEMENTS FOR THE PRACTICING LAWYER By Thom Edmonds INTRODUCTION The purpose of this article is to acquaint the lawyer who advises small businessmen with financial statements. The accounting system and resultant financial statements are the backbone of the information system of the enterprise. Although much of the information may be historical in origin, its true value lies in its basis for future action. The lawyer representing a business client may have occasion to use financial statements when nego- tiating financial arrangements or other business transactions. Therefore, it is incumbent on the attorney representing a business to be familiar with its financial statements. There are many full length books written on the subject of accounting and financial statements. It should be readily apparent, therefore, that detailed treatment of the subject cannot be given in an article of this length. The scope of this article is limited to a general discussion of the balance sheet, the income statement and the capital statement. Also various ratios which can be used in analyzing the financial condition of the business are discussed. ACCOUNTING AND FINANCIAL STATEMENTS Accounting and financial statements are used to appraise the relative operating success or failure of a business. In order to derive the maximum benefit from the financial statements, they should be as comprehensive as possible, prepared on a frequent basis, and employed in the decision-making processes of the enterprise. The financial statements can help the business- man determine proper costs, revenues and expenses from which he can insure maximum efficiency and thus maximize profits. Financial statements summarizes transactions entered into by the busi- ness enterprise. They have a variety of internal and external uses. Internal uses include: 1) Historical data of the business; 2) Planning future operations based on past performance (e.g. debt or equity financing); and 3) The discovery of trends and their causes. The principal external function is influence in the securing of outside fi- nancing from lenders, such as banks and other financial institutions. Out- side financing sources will rely to a great extent upon the financial state- ments in making an investment decision.
Publication Year: 1975
Publication Date: 1975-01-01
Language: en
Type: article
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