Financial Statement

What are Financial Statements?

Financial statements are reports prepared by a company’s management to present the financial performance and position at some extent in time. A general-purpose set of monetary statements usually includes a record, earnings report s, statement of owner’s equity, and statement of money flows. These statements are prepared to offer users outside of the corporate, like investors and creditors, more information about the company’s financial positions. Publicly traded companies also are required to present these statements along-side others to regulatory agencies during a timely manner. Financial statements are written records that convey the business activities and therefore the financial performance of a corporation. Financial statements are audited by government agencies, accountants, firms, etc. to make sure correctness to shareholders and for tax rebates. Financial statements includes:

• Balance sheet
• Income statement
• Cash flow statement

What Does Financial Statements Mean?

Financial statements are the most source of monetary information for many decision makers. That's why financial accounting and reporting places such a high emphasis on the accuracy, reliability, and relevance of the knowledge on these financial statements.

Using budget Information

Investors and financial analysts believe financial data to research the performance of a corporation and make predictions about its future direction of the company's stock price. One among the foremost important resources of reliable and audited financial data is that the annual report, which contains the firm's financial statements.
The financial statements are employed by investors, market analysts, and creditors to gauge a company's financial health and earnings potential. The three major budget reports are the record, income statement, and statement of money flows.

Understanding Balance Sheets

The record provides a summary of a company's assets, liabilities, and stockholders' equity as a snapshot in time. The date at the highest of the record tells you when the snapshot was taken, which is usually the top of the financial year.
The record Formula                Assets = Liabilities + Owner’s Equity

The record totals are going to be calculated already, but here's how you identify them.
1. Locate total assets on the record for the amount.
2. Total all liabilities, which should be a separate listing on the record. It's going to not include contingent liabilities.
3. Locate total shareholder's equity and add the amount to total liabilities.
4. Total assets should equal the entire of liabilities and total equity.

Data From the record

The record identifies how assets are funded, either with liabilities, like debt, or stockholders' equity, like retained earnings and extra paid-in capital. Assets are listed on the record so as of liquidity.
Liabilities are listed within the order during which they're going to be paid.
Items Included within the record below are samples of items listed on the record.

Assets

• Cash and cash equivalents are quick assets, which can include Treasury bills and certificates of deposit.
• Accounts receivables are the quantity of cash owed to the corporate by its customers for the sale of its product and repair.
• Inventory

Liabilities

• Debt including long-term debt
• Rent, tax, and utilities
• Wages payable
• Dividends payable

Shareholders' Equity

• Shareholders' equity may be a company's total assets minus its total liabilities. Shareholders' equity represents the quantity of cash that might be returned to shareholders if all of the assets were liquidated and every one of the company's debt was paid off.
• Retained earnings are a part of shareholders' equity and are the share of net earnings that weren't paid to shareholders as dividends.