Personal Financial Situation the Management of a Essay

Excerpt from Essay :

Personal Financial Situation

The management of a Fortune 500 organization utilizes financial statements to craft corporate strategy on a quarter to quarter and year over year basis. These statements: balance sheet, income statement, and statement of cash flows contain crucial financial information which explicates how successful a company has been and its potential future prospects. These same three statements can be used by me as I face financial scenarios which require examination of assets, income, and its sources.

Financial Statements

I will look to my financial statements as I seek to purchase a home, save for retirement, and contemplate starting a small business. A corporation's financial statements are contained in the annual report distributed to shareholders; my personal financial statement will contain the same data in a single page format. The balance sheet portion "summarizes a company's assets, liabilities and shareholders' equity at a specific point in time (Investopedia. N.D.); similarly the statement will identify what I own and owe. The income statement "measures a company's financial performance over a specific accounting period, summarizing how the business incurs its revenues and expenses" (Investopedia. N.D.). For me the income statement details their income earned on a monthly basis and the dollars that are paid out in the form of expenses and debt payments. Lastly, the statement of cash flows details "all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter" (Investopedia. N.D.). My statement contains the sources of income and its eventual uses.

Home Ownership

I decide that I no longer wish to rent and instead choose to investigate the possibility of owning a home. After filling out the loan application at the local financial institution using information from my personal financial statement, the loan officer and I review the data. I work at General Electric as a network programmer making $48,000 a year, $4,000 gross a month; information found on the income statement. The bank requires a 20% down payment on the purchase of the $100,000 home. The financial statement (balance sheet) indicates that I have $25,000 in savings which can be used for this purpose. As for expenses and debt I have $1,200 monthly outflow which includes the new mortgage payment. The bank requires that monthly expenses do not exceed 36% of total income; I fall in line at 30%. After further review, a check of employment, and verification of the information on the application the mortgage loan is approved. The financial statements have provided the requisite information for my major life purchase.

Retirement Savings

Confidently set up in my new home two months later, I look at the financial statements to set up plan for saving for retirement. The statement of cash flows section details the $4,000 in income earned from GE, along with the expenses and bills…

Sources Used in Document:

References

Investopedia. (N.D.). Balance Sheet. Investopedia. Retrieved June 13, 2011 from http://www.investopedia.com/terms/b/balancesheet.asp

Investopedia. (N.D.). Income Statement. Investopedia. Retrieved June 13, 2011 from http://www.investopedia.com/terms/i/incomestatement.asp

Investopedia. (N.D.). Statement of Cash Flows. Investopedia. Retrieved June 13, 2011

from http://www.investopedia.com/terms/c/cashflowstatement.asp

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