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What are Financial Statements?
Financial statements are the reports published by an organization in order to convey information regarding their financial position and recent business performance.
It has three major things:-
Income Statement
· To know about the Profit or Loss for a particular period.
· Prepared annually or quarterly for the larger companies
Balance Sheet
· It denotes what the company owns (Assets) and the company owes (Liabilities).
· There are two sides in Balance Sheet Assets and Liabilities + Equities.
· General Formula of Balance sheet:
Assets = Liabilities + Equities.
Cash Flow Statement
· It shows the Cash outflow and Cash inflow in the organization.
· Usually shows the change in cash from three main activities are as follows:
1. Operating Activities.
2. Financing Activities.
3. Investing Activities.
Why do we need Financial Statements?
v How much goods and services business was able to sell?
v How much cost incurred to operate the business.
v How much money businesses have in the bank.
v How much business is growing as compared from the previous time period.
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