Each question is required to have organized and well thought out responses in Es

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Each question is required to have organized and well thought out responses in Essay format with a minimum of 2 paragraphs.

9- Explain the Four Key Financial Statements:
Income Statement (also known as Profit / Loss, or Statement of Operations)
Balance Sheet
Cash Flow Statement
Stockholders' Equity Statement

11-Explain the aspects of financial diversification and why Companies use financial diversification to limit business risk. Is financial diversification the only cure-all for the disease known as business risk?

Explanation / Answer

9) Income statement - It is the financial statement which tells us the operating performance of the company during the year compared to pervious year. It lists down all the income and expenses related to a business along with the tax paid and interest paid with Net profit of the company.

Balance sheet - The balance sheet is a financial statement which tells us the health of the company or position of the company at any given point of time. It lists down all the current assets, non current assets, current liabilities and non current liabilities at any particular point of time.

Cash flow statement - It is a financial statements which tells us all the cash inflows and cash outflows during the year vis a vis previous year. It lists down cash flows from all the operating activity, financing activities and investing activities.

Equity statement - It tells us the equity position of the company at any particular point of time. It tells us the shareholders equity, retained earnings, current year profits etc.

11) Financial diversification is one of the most efficient and proven method of diversifying risk. Many companies now a days practice the financial diversification to mitigate the business risk. This is the reason the companies operate in multiple sectors and in mutiple product lines. In case of any downturn, or any particular industry segment going down, the company can limit the impact on their topline as other product lines contribute to the revenue who belongs to the other industry segments.

There are other ways as well to hedge and to mitigate the risk associated with the business but Diversification is the most efficient and proven method that the companies practice. It is also most reasonable and logical as well. Not just at the big corporate level even at the discreate level like individual portfolio management also works on the principle of financial diversification.

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