Skip to main content

Financial statements are a collection of written records presenting an overview of an organization’s financial position, cash flows, and results. Financial statements are usually audited by accountants, government agencies, and other firms and organizations who verify the accuracy of a business’s financial reporting for financing, investing, or tax purposes.

What is the Purpose of Financial Statements?

Financial statements are crucial for businesses to prepare and analyze for the following reasons:

  • Gauging a business’s ability to generate cash
  • Offering an accurate idea of whether a business can pay back its debts
  • Identifying any profitability issues while tracking and calculating expenses and revenue
  • Providing insight into financial relationships that can represent the condition of a business
  • Investigating business transactions
  • Helping companies make informed business decisions

What are the Types of Financial Statements? 

Financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential. 

The major financial statements are:

  1. Balance sheets
  2. Income statements
  3. Cash flow statements
  4. Statements of shareholders’ equity

What is a Balance Sheet? 

A balance sheet provides a summary of a company’s assets, liabilities, and stockholders’ equity as a snapshot in time. The date at the top of the sheet informs you when the snapshot was taken, which is generally at the end of the reporting period. However, balance sheets do not show the money that goes into or out of a company’s accounts.

Continue ahead for a breakdown of the items on a balance sheet.


  • Cash and cash equivalents are liquid assets, which can include Treasury bills and certificates of deposit 
  • Accounts receivables: The amount of money owed to the company by its customers for the sale of its product and service.
  • Inventory


  • Debt, including long-term debt
  • Wages payable
  • Dividends payable

Shareholders’ equity

  • Shareholders’ equity is a company’s total assets minus its total liabilities. It represents the amount of money that would be returned to shareholders if, all of the assets were liquidated and all of the company’s debt was paid off
  • Retained earnings are part of shareholders’ equity and are the number of net earnings that were not paid to shareholders as dividends

What is an Income Statement? 

An income statement illustrates the revenue a company has earned over a period of time. It also displays the expenses incurred while earning that revenue. The top of an income statement lists the gross sales revenue. Returns and allowances are then subtracted from the gross amount, so the second line of the statement shows the net sales a company possesses.

Companies make deductions at each step in the income statement for specific costs or other operating expenses associated with earnings. The last line of the statement notes the company’s net earnings or losses, which tells you how much a company has earned or lost in that fiscal year. 

Overall, the leading purpose of an income statement is to convey details of profitability and the financial results of business activities. But, it can be very beneficial in showing whether sales or revenue is increasing when comparing multiple periods.

What is a Cash Flow Statement (CFS)? 

Cash flow statements summarize the movement of cash and cash equivalents in and out of a company. They take information from a company’s balance sheet and income statement and reorder it to inform you whether or not the company generated cash. Cash flow statements are divided into three main parts to assist in reviewing the cash flow from each of these activities: operating activities, investing activities, and financing activities.

What is a Statement of Changes in Equity? 

A statement of changes in equity derives from the balance sheet statement by offering additional information about shareholders’ equity during a reporting period. Shareholders’ equity statements help disclose stock sales and repurchases by the business reporting the information. 

The beginning balance is set up across the top of the grid-like report, which includes additions and subtractions from the balance located in the middle of the report. Ending balances are placed at the bottom of the report after additions and subtractions are incorporated. Also, there should be figures totaled at the top and bottom of the report for the total amount of beginning and ending shareholders’ equity. 

Columns in the report may incorporate the following:

  • Treasury stock
  • Accumulated other comprehensive income
  • Totals column
  • Common stock
  • Preferred stock
  • Retained earnings

What is the Consolidated Financial Statement? 

Consolidated financial statements are statements of an entity with multiple divisions or subsidiaries. Companies often use the term consolidated loosely in financial reporting referring to the aggregated reporting of their entire business collectively. But, the Financial Accounting Standards Board defines consolidated statement reporting as reporting of entities structured with a parent company or subsidiaries. 

Consolidating financial statements requires companies to incorporate and combine all of their financial accounting functions to create consolidated financial statements. They will show results on standard balance sheets, income statements, and cash flow statement reporting. Filing a consolidated financial statement is mainly based on the amount of ownership the parent company has in the subsidiary.

What is the Government Financial Statement? 

Government financial statements disclose all financial transactions for the government for the year. These statements are not a budget but a history listing the revenue collected and the amounts the government spent. A state of activities and a statement of net position are usually included. And while not necessary, balance sheets can be incorporated too. These statements are generally intended for state and local governments.

What is the Personal Financial Statement? 

A personal financial statement is a document or spreadsheet that outlines an individual’s financial position at any given point in time. It typically consists of general information about the individual, such as name and address, along with a breakdown of total assets and liabilities. The statement can help people track their financial goals and wealth and be used when they apply for credit.

Updated personal financial statements help individuals track how their financial health improves or deteriorates over time. These tools can be invaluable when consumers want to change their financial situation or apply for credit, such as a loan or a mortgage. By knowing their current financial standing, consumers can avoid unnecessary inquiries on their credit reports and the hassles of declined credit applications.

What Are the 3 Most Important Financial Statements? 

The three most important financial statements are:

  • Balance Sheet
  • Income Statement
  • Cash Flow Statement

All of these statements illustrate the assets and liabilities of a business, its revenues, and its costs, along with its cash flow from operating, investing, and financing activities.

What are the Financial Statement Ratios and How is it Calculated? 

There are several ratios investors use to calculate information on financial statements and use the results to evaluate companies. Keep in mind that desirable ratios vary for each industry.

  • P/E Ratio

The P/E ratio is Price per share divided by earnings per share. Suppose a company’s stock sells at $20 per share and the company earns $2 per share. That means the company’s P/E ratio is 10 to 1. The company’s stock sells at 10 times its earnings.

  • Current ratio

The current ratio assesses whether or not it is wise to invest in a given company. It results from a concise formula from numbers that can be found on the balance sheet. You can compute the current ratio by dividing a company’s total current assets by its total current liabilities in dollars.

  • Operating margin

The operating margin compares a company’s operating income to net revenues. Both of these numbers can be found on a company’s income statement. To determine the operating margin, you must divide a company’s income from operations (before interest and income tax expenses) by its net revenues.

  • Debt-to-equity ratio

The debt-to-equity ratio compares a company’s total debt to shareholders’ equity. Both of these numbers can be discovered on a company’s balance sheet. To calculate the debt-to-equity ratio, you have to divide a company’s total liabilities by its shareholder equity.

What are the Limitations of a Financial Statement? 

Even though financial statements provide abundant information on a company, they have limitations. Financial statements are open to interpretation, and investors often draw enormously different conclusions about a company’s financial performance. 

For instance, some investors may want to stock repurchases but others may prefer to see that money invested in long-term assets. A company’s debt level might be decent for one investor, while another has concerns about the level of debt for the company.

Whenever you analyze financial statements, it is critical to compare multiple periods to gauge if there are any trends. Additionally, you must compare the company’s results to its peers in the same industry.

What Are the Main Items Shown in Financial Statements? 

The line items for corporations vary depending on the corporation. They represent different incomes and expenses acquired. 

However, the main items shown on financial statements are:

  • Revenues
  • Cost of goods sold 
  • Taxes
  • Cash
  • Marketable securities
  • Inventory
  • Short-term debt
  • Long-term debt
  • Accounts receivable
  • Accounts payable
  • Cash flows from investing
  • Operating
  • Financing activities

What Are the Benefits of Financial Statements? 

Financial statements detail how a company operates. It offers insight into how much and how a business generates revenues, what the cost of doing business is, how efficiently it manages its cash, and what its assets and liabilities are. Financial statements display key information on how well or poorly a company manages itself.

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosofutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88