Financial Statements And Reporting
Financial Statements And Reporting
Financial statements are written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. The most important financial statement for the majority of users is likely to be the income statement since it reveals the ability of a business to generate a profit. Also, the information listed on the income statement is mostly in relatively current dollars, and so represents a reasonable degree of accuracy.
Investors and financial analysts rely on financial data to analyze the performance of a company and make predictions direction of the company's stock price. One of the most important resources of reliable and audited financial data is the annual report, which contains the firm's financial statements.
The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.
- Financial statements are written records that convey the business activities and the financial performance of an entity.
- The balance sheet provides an overview of assets, liabilities, and shareholders' equity as a snapshot in time.
- The income statement primarily focuses on a company’s revenues and expenses during a particular period. Once expenses are subtracted from revenues, the statement produces a company's profit figure called net income.
- The cash flow statement (CFS) measures how well a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments.
- The statement of changes in equity records how profits are retained within a company for future growth or distributed to external parties.
GAAP-
Generally Accepted Accounting Principles (GAAP) are the set of rules by which United States companies must prepare their financial statements. It is the guidelines that explain how to record transactions, when to recognize revenue, and when expenses must be recognized. International companies may use a similar but different set of rules called International Financial Reporting Standards (IFRS).
