financial statement

A financial statement is a formal record of a company’s financial activities, position, and performance. It provides a summary of the company’s financial transactions, including revenues, expenses, assets, liabilities, and equity, over a specific period of time.

The main types of financial statements include:

1. Income Statement (or Profit and Loss Statement): This statement summarizes a company’s revenues, expenses, and net income (or net loss) over a specific period. It provides insights into the company’s profitability by showing the revenue generated and the expenses incurred to generate that revenue.

2. Balance Sheet: The balance sheet presents the company’s financial position at a specific point in time, usually the end of a reporting period. It shows the company’s assets, liabilities, and shareholders’ equity, providing a snapshot of what the company owns and owes.

3. Cash Flow Statement: This statement presents the cash inflows and outflows from the company’s operating, investing, and financing activities during a specific period. It tracks the sources and uses of cash, providing insights into the company’s ability to generate and manage cash flow.

4. Statement of Shareholders’ Equity (or Statement of Changes in Equity): This statement shows the changes in shareholders’ equity over a specific period. It includes information on the company’s retained earnings, additional paid-in capital, share repurchases, and dividends.

Financial statements are prepared in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS). They provide essential information for stakeholders, including investors, creditors, regulators, and internal management, to assess the company’s financial performance, make informed decisions, and comply with reporting requirements.

Financial statements are typically audited by external auditors to provide an independent verification of their accuracy and compliance with accounting standards. These statements, along with accompanying notes and disclosures, are crucial for financial analysis, forecasting, and making informed investment or credit decisions.