A business financial statement is a report of the company’s financial performance and condition. These statements are prepared from information contained in the books of account and consolidated with other information that has been gathered from sources external to the company.
Income Statement
The Income Statement is a financial statement that shows the revenues, expenses and profits of a business over a given period of time. It’s important to understand how to read an income statement because it will help you make better decisions as a manager or investor in a company.
The following sections will explain what each line item on an income statement means and how you can use this information to assess whether or not a company is performing well financially:
- Gross profit (or gross margin): This is calculated by subtracting cost of goods sold from total revenue
- Operating income/net operating profit after taxes (NOPAT): This represents how much money your business has made after paying for all operating expenses such as salaries, rent, utilities etc but before taking into account taxes or interest payments
Balance Sheet
A balance sheet is a snapshot of a company’s assets, liabilities, and equity at a given point in time. Assets are things that have value to the business–cash, inventory, property–while liabilities include debts owed by the company (think credit card payments or loans). Equity is the difference between assets and liabilities; it represents how much owners have invested in their business plus any profit they’ve made since starting out.
Statement of Cash Flows
The statement of cash flows is a financial report that shows how much cash an organization has received and spent over a given period of time. It’s important to understand the liquidity of your business, because it can help you determine if there are any issues with its financial health.
To use this information effectively, though, you need to learn how to read and interpret it correctly.
Notes to Financial Statements
Notes to Financial Statements
Notes to financial statements are supplemental information to the financial statements. They often include information about accounting policies, management’s discussion and analysis, and other relevant information.
These statements can help you understand financial health of a company.
In the business world, financial statements are used to measure the performance of a company and its financial health. They are also used by investors, creditors and other stakeholders to make decisions about whether or not they should invest in a company.
The three main types of financial statements are:
- Income statement – Shows revenue and expenses for a given period (usually quarterly or annually)
- Balance sheet – Lists assets, liabilities and equity at a specific point in time
- Statement of cash flows – Shows cash flow from operating activities (the day-to-day running of your business), investing activities (such as buying new equipment) and financing activities (taking out loans).
The financial statements are a way to understand the financial health of a company. They can be used as a tool for investors and other stakeholders who want to understand how well their investments are performing or whether there is potential for growth in the future. The three most important statements are the Income Statement, Balance Sheet and Statement of Cash Flows which all contain valuable information about how well (or poorly) your company performed over time.
