Financial Statement
Explanation: A financial statement is a formal record of the financial activities and position of a business, person, or other entity. These are written reports that quantify the financial strength, performance, and liquidity of a company. The main types of financial statements include the balance sheet, income statement, and cash flow statement.
Example: A company releases its quarterly financial statements, which include an income statement showing revenue, expenses, and profit; a balance sheet showing assets, liabilities, and shareholders’ equity; and a cash flow statement detailing the cash inflows and outflows from operating, investing, and financing activities.
Reference Link: For more information on financial statements, visit Investopedia’s Financial Statement.
FAQs:
- What are the main components of a financial statement?
- The balance sheet, income statement, and cash flow statement.
- Why are financial statements important?
- They provide a comprehensive overview of a company’s financial health, performance, and cash flow, essential for decision-making by investors, management, and stakeholders.
- How often are financial statements prepared?
- Typically quarterly and annually, though some companies may prepare them monthly.
- What is the difference between an audited and unaudited financial statement?
- Audited financial statements have been reviewed by an independent auditor for accuracy, while unaudited statements have not.
- Who uses financial statements?
- Investors, creditors, management, regulators, and analysts use them to assess a company’s financial status and performance.