Financial statements are summaries of monetary data about an enterprise. The most common financial statements include the balance sheet, the income statement, the statement of changes of financial position and the statement of retained earnings. These statements are used by management, labour, investors, creditors and government regulatory agencies, primarily. Financial statements may be drawn up for private individuals, non-profit organizations, retailers, wholesalers, manufacturers and service industries. The nature of the enterprise involved dramatically affects the kind of data available in the financial statements. The purposes of the user dramatically affect the data he or she will seek.
The balance sheet provides the user with data about available resources as well as the claims to those resources. The income statement provides the user with data about the profitability of the enterprise detailing sources of revenue and the expenses which reduce profit. The statement of changes of financial position shows the sources and uses of a firm's financial resources, demonstrating trends in the alteration of its capital structure. The statement of retained earnings reconciles the owners' equity section of successive balance sheet
The debt-to-equity ratio provides an indication of how heavily the supplier is in debt, relative to the amount of capital provided by the owners. The higher the ratio, the more concerned one should be about the long-term welfare of the supplier. As a customer, we probably wouldn't be too concerned as long as the supplier's D/E ratio is less than 100 percent, which would indicate equal amounts of debt and equity capital.
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