A financial statement is a comprehensive report that summarizes a company's financial activities, including its assets, liabilities, income, and expenses.
Financial statements provide crucial insights into a company's financial position, profitability, and cash flow. By analyzing financial statements, investors, stakeholders, and analysts can make informed decisions about the company's prospects and stability.
Financial statements serve as a snapshot of a company's financial condition, presenting a clear picture of its assets, liabilities, income, and expenses. Here are key reasons why financial statements are important:
The three main types of financial statements are:
The balance sheet presents a snapshot of a company's financial position at a specific point in time. It highlights the company's assets, liabilities, and shareholders' equity. The balance sheet shows what the company owns, what it owes, and the residual value attributed to shareholders.
The income statement, also known as the profit and loss statement, showcases a company's revenues, expenses, gains, and losses over a specific period. It provides insights into the company's profitability and measures its ability to generate profit.
The cash flow statement tracks the flow of cash in and out of a company during a particular period. It classifies cash flows into operating, investing, and financing activities. The cash flow statement helps assess the company's liquidity and ability to meet short-term obligations.
