How would you use the financial statement to determine when to the need for the purchase of inventory? Which statement(s) would you use?

To determine the need for the purchase of inventory, you can use various financial statements. The statements that are typically used for this purpose are the income statement, balance sheet, and cash flow statement.

1. Income Statement: This statement provides information about a company's revenues, expenses, and profitability over a specific period. By analyzing the income statement, you can assess the company's sales performance and identify any trends. A significant increase in sales may indicate a higher demand for inventory, suggesting the need for a purchase.

2. Balance Sheet: The balance sheet provides a snapshot of a company's financial position at a given point in time. It shows the company's assets, liabilities, and shareholders' equity. You can use the balance sheet to monitor the inventory levels. A decrease in inventory compared to previous periods may indicate a need for replenishment.

3. Cash Flow Statement: This statement tracks the inflows and outflows of cash during a specific period. By examining the cash flow statement, you can analyze the company's ability to generate cash and manage its operations. If there is a consistent negative cash flow from operating activities, it may suggest that the company needs to purchase inventory to meet customer demand.

In summary, by analyzing the income statement for sales performance, the balance sheet for inventory levels, and the cash flow statement for cash flow trends, you can evaluate the need for the purchase of inventory.