Financial Statements

Financial Statements (Definition)

Financial statements are written records that convey the business activities and the financial performance of a company.

Key aspects of financial statements include:

1. Typically include balance sheet, income statement, cash flow statement, and statement of changes in equity
2. Provide a snapshot of a companys financial position at a specific point in time
3. Used by management, investors, creditors, and regulators to assess a companys financial health
4. Prepared according to generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS)
5. Subject to audits to ensure accuracy and compliance with reporting standards
6. Essential for financial planning, decision-making, and meeting regulatory requirements
7. Comparative statements allow for analysis of financial trends over time

Understanding and interpreting financial statements is crucial for effective business management and investment decision-making.