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The statement of shareholder equityThe changes to a company’s equity section of the balance sheet over a year. describes the changes to a company’s equity section of the balance sheet over a year. This includes any equity account transactions such as retained earnings, common and preferred stock as well as other income. It shows the beginning balance, any additions or deductions and the ending balance of shareholder equity. A pro-forma statement of shareholder equity is shown in Figure 4.4 "Pro-Forma Statement of Shareholder Equity".
Figure 4.4 Pro-Forma Statement of Shareholder Equity
The statement of retained earningsAbbreviated statement that states the changes to retained earnings over a year. reports the change in retained earnings over a year. In essence it is an abbreviated form of the statement of shareholders equity. This statement explains the changes in retained earnings from net income (or loss) and from any dividends over a period of time. A pro-forma statement of retained earnings is shown in Figure 4.5 "Pro-Forma Statement of Retained Earnings".
Figure 4.5 Pro-Forma Statement of Retained Earnings
Just as the endnotes to a paper or the notes in a margin of a novel may be the most important and thought provoking pieces, the notes to financial statementsImportant information describing what occurs in financial statements. may be the most interesting as well. Financial statements will often include explanatory notes about important parts of the statement. These notes provide more detailed information about the transactions occuring in the statements. Common issues discussed include income taxes, revenue discussion, details about fixed assets, pension plan details, stock options and debt terms. Since the passage of Sarbanes-Oxley the financial statement notes also include information about compliance to the law. Because these items can have an effect on the bottom line of a company these notes are very important to read.
Review the following 10-K statements
Here is a link to Nike’s 10-K.
(http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2010/docs/NIKE_2010_10-K.pdf) . Can you find the statement of shareholder equity? The statement of retained earnings? Any notes to financial statements?
Here is a link to Starbuck’s 2011 10-K.
What does the statement of retained earnings say about the company?
Here is a link to McDonald’s 10-K.
Can you find any notes to financial statements?