In most cases, financial statements will play a very significant role in business, finance, and economics research papers
. For students incorporating data of this sort, special attention needs to be given to interpreting and abstracting information in a manner that will best argue or prove a given claim or hypothesis. Outside of the research paper, other business-related documents that may be prepared by students are case analyses, business plans, reports, and proposals. All of these types of writings likewise may call for the inclusion of financial statements whether it be for a business, organization or an individual.
The meaning of financial statement may differ somewhat across regions and industries but in general it is an organized report or record of a person or business' financial activity. In regards to companies, this document can be explained a little differently and is comprised of elements such as cash operations, shifts in equity, balance sheets and so on. As explained by the U.S. Securities Exchange and Trade Commission, financial statements "show you where a company's money came from, where it went, and where it is now."
The utility and analysis of financial statements may differ slightly depending on the type of research that is being conducted. Below are some considerations of this.
Data and your research paper
When constructing a paper based on original research, a general outline to follow may include; an Introduction, Literature Review, Methods, Results, Analysis/Discussion, Conclusion, Appendix (optional). The financial records that you obtain for any business, such as its statements, may end up only being in the appendix section of your paper (if the data is only loosely connected to your findings and really has no place in the body of the paper). Otherwise, the more suitable condition for it to be included in the body of the paper would be if the statement was used as a tool in your research-then it would be appropriate to include it in the methods section.
Likewise, when conducting a research paper based on secondary sources and business theory for instance, you will find that financial statements may be included in the analysis and discussion sections of the paper. They may be used as evidence to support a particular claim or an illustrative example to prove a point. Regardless of the surrounding context, financial statements can easily be analyzed by pinpointing any relevant data that can benefit or support your argument.
Analyzing different types of financial statements
The term analyze is distinct from the term evaluate in that it involves breaking something down into smaller parts and then working to interpret the meaning or function of each component (whereas an evaluation is based on judgments or claims). This definition matches very well with the process of integrating and examining financial statements for many business and finance papers. The first step in analyzing these statements is to simply understand what each offers and how the information relates to your argument and sub points of interest. *There are four main types of financial statements.
First type: Balance sheets
Balance sheets indicate three main company interest (a) its assets (b) its liabilities (c) and its shareholder's equity. The shareholder's equity is the company's net worth, the assets are what it owns, and the liabilities are what it owes. It is possible that you may find this data useful and pertinent for some statements and claims made in your paper. Though the biggest limitation of such information is that it only reflects a single point and time (for instance the end of a fiscal year for example) and not a long term outlook or overview of a company's history.
Second type: Income statements
You may find this information very relevant in support of your main argument. Mainly because it provides a detailed look at the company's profits and losses. For an argument in support of or against any type of management practices an intimate look into this type of financial statement can clearly indicate the success or failure of certain techniques and how they improve or worsen a business's' overall profits. Also unlike the balance sheet the income statement is reflective of a total year which helps to gain a fuller picture of the progress and prosperity of an organization.
Third type: Cash flow statements
These statements simply provide a record of the company's cash history and details their acquisition of cash over a time period (through its operations, investments, and financing activities). This information is usually gathered from balance sheets and income statements and can be useful depending on the paper topic and argument. If perhaps as student is looking at a company's ability to pay its employees and other related expenses after the enactment of a certain policy or governmental change for example, then this statement may be very beneficial.
Fourth type: Changes in shareholder's equity
This category was mentioned somewhat earlier and primarily focuses on retained earnings, stock transactions and dividends that were paid out to shareholders. This type of financial statement may be popular for topics that involve major fortune 500 companies that have very complex equity situations and may be grounds for an interesting or fruitful debate.
Additional examples and writing tips
When presenting any type of data either for original research or for theoretical analysis, considerations need to be given to the guidelines of a particular formatting style (APA or MLA
for instance), as well as whether or not the data is relevant and supportive to the given argument.
*For example, ask yourself-Why exactly are a company's balance sheets important for the development of my argument? The answer may be that by being able to discuss and evaluate business balance sheets you're able to examine the success or failure of certain business models, practices, and management decisions.
Additionally, its very important to recognize and acknowledge when financial information is unnecessary and will distract or 'clutter up' your paper. This can too easily occur when some bits and pieces of information seem interesting and important but are really not relevant or in support of your research question and thesis statement
*For instance, if while analyzing the performance of a particular company you decide to improve your discussion by comparing it to similar companies in the same industry it may not then be necessary to pull financial documents for all of those other companies that you are comparing it to. Simply stating the financial position of those companies in a sentence or two should be sufficient.
Lastly, for business as well as other papers it is not ethical to omit or alter financial documents to better support your argument. If the figures in a document state something in opposition to your hypothesis or approach, be clear and upfront about those contradictions and elaborate on any issues in the discussion or conclusion sections of your paper
(those sections are where you can reflect on any things that went wrong in the research process or the things that you would have done differently if conducted a second time).