Financial statements help businesses understand their performance and make informed decisions.
- Income Statement
The income statement shows revenue, expenses and profit over a specific period.
Key Components:
- Revenue
- Cost of Goods Sold
- Operating Expenses
- Net Profit
- Balance Sheet
The balance sheet provides a snapshot of a company’s financial position.
The basic accounting equation is:
Assets = Liabilities + Equity
Assets include cash, inventory and equipment. Liabilities include loans and obligations. Equity represents the owner’s interest in the business.
- Cash Flow Statement
This statement tracks cash moving into and out of the business.
Categories:
Operating Activities
Investing Activities
Financing Activities
Why These Statements Matter
Together, these reports help business owners, investors and stakeholders evaluate financial health and performance.