The aim of this paper is to describe how a company uses financial statements to make informed business decisions. Accounting terms will be introduced as well as how a company uses the information from financial statements to run their business. Assets refer to any an item of value that is owned by an individual or a company; this is particularly true if the item can be converted to cash. Examples of assets may be accounts receivable, office equipment, cash, real estate, preferred stock, or property. Retained earnings are the amount a company has made since its inception after dividends are deducted. Retained earnings are sometimes referred to as earned surplus, accumulated earnings, or retained capital. The function of this particular statement is to total the retained earnings of the shareholders’ equity and to summarize any changes of those earnings in a fiscal period (Investopedia, 2009). Most often companies keep their earnings so they may invest into various areas of the company to create growth opportunities such as research and development; other times the company may choose to pay profits out to shareholders, generally the choice made is one that will generate the most money for shareholders. In accounting jargon liability isdescribed as obligation. Liability refers to any monies owed before the finish of a transaction or services/products that have not yet been provided but have been paid for. There are two types of liability: long and short-term (Encyclopedia of Business, 2007); long-term describes credit that has been given and that will be paid off in more than a year’s time; short term liability is a owing balance which will be paid in less than a year’s time. Companies may have many types of liabilities including employee pensions or even ...