Learn Everything About Financial Statements

What are Financial Statements?

Financial statements are documents that document the business activities and financial performance of an organization. These statements are typically scrutinized by accounting firms, government agencies, and others to verify their accuracy and for financing, tax, or investment reasons. The financial statements contain:

• Balance sheet
• Statement of income
• Statement of cash flow.

Key TAKEAWAYS

• Financial statements document the business operations and financial performance of a business.
• The balance sheet offers an overview of the assets, liabilities and stockholders' equity as a quick snapshot of the past.
• The income statement primarily focuses on the company's revenue and expenses for a specific time. When expenses are subtracted from revenue, the report yields the profit of the company, known as net income.
• Cash flow statements (CFS) examine how an organization generates enough cash to settle its debt obligations, finance operating expenditures, and fund investments.

Using Financial Statement Information

Financial analysts and investors rely on financial information to evaluate the performance of a business and make forecasts about the future direction for the company's value of its stock. One of the primary sources of authentic and verified financial information can be found in the annual reports, including the firm's financial statements.

Market analysts utilize these Financial statements, investors and lenders to assess the company's financial health and potential earnings. The three main financial statement statements include the balance sheet, income statement, and the statement on cash flow.

Understanding the Balance Sheets

Balance sheets summarise the company's assets, liabilities, and stockholders' equity as a snapshot of the past. The date on the upper right of the statement will tell what date the snapshot was made, typically the date of the close of the fiscal year.

Income Statements

In contrast to the balance sheet, the income statement is an extended period; it is a full year for annual financial statements and the quarter for financial statements that are quarterly. The income statement gives an overview of the revenue and expenditures, net profits, and the earnings of each share. The typical income statement contains between two and three years of data to allow for comparison.

The cash flow statement

A cash flow report (CFS) is a way to determine how the company can generate cash to pay its debt obligations, pay its operating expenditures, and fund investments. It is a supplement to those on the statement of balance and the revenue statement.