Financial statements are a set of financial reports that provide information about a company's financial performance and position. They are typically prepared at the end of each accounting period, such as a quarter or a year. The main purpose of financial statements is to provide information that is useful to a wide range of users, including investors, creditors, and management, in making business and economic decisions. The three main financial statements are:
Balance sheet: Also known as a statement of financial position, this report shows a company's assets, liabilities, and shareholders' equity at a specific point in time.
Income statement: Also known as a statement of profit and loss, this report shows a company's revenues, expenses, and net income over a specific period of time.
Statement of cash flows: This report shows how a company's cash balance changes over a specific period of time, due to its operating, investing, and financing activities.
The financial statements are often accompanied by footnotes and management discussion and analysis (MD&A) that provide additional information and context to the financial numbers.
The three main financial statements are:
Also known as a statement of profit and loss, is one of the main financial statements that provides information about a company's financial performance over a specific period of time, such as a quarter or a year. The income statement shows how much revenue a company has generated, what its expenses have been, and what its net income or net loss is.
Revenues: This is the money a company earns from its sales or other activities.
Expenses: These are the costs that a company incurs in order to generate revenues. Examples of expenses include cost of goods sold, selling, general and administrative expenses, interest and taxes.
Net income (or net loss): This is the difference between revenues and expenses. If revenues are greater than expenses, the company has a net income. If expenses are greater than revenues, the company has a net loss.
The income statement is an important financial statement that helps investors and analysts to understand how well a company is performing and whether it is generating profits or not. It gives an idea of the company's ability to generate cash flow and measure the efficiency of its operations.
Operating Expense
Net Profit Margin
Earning Per Share
EBITDA
Effective tax rate
A balance sheet is one of the main financial statements that provides a snapshot of a company's financial position at a specific point in time. The balance sheet is divided into two sections: assets and liabilities.
Assets: These are the resources that a company owns or controls, and that are expected to provide future economic benefits. Examples of assets include cash, accounts receivable, inventory, investments, property, plant and equipment.
Liabilities: These are the obligations that a company owes to others, and that are expected to settle in the future. Examples of liabilities include accounts payable, loans, mortgages, and other debts.
The balance sheet must balance, meaning that the total of assets must equal the sum of liabilities and shareholders' equity. This is because assets are financed either by borrowing money (liabilities) or by using the money invested by shareholders (shareholders' equity).
Cash and short-term investments
Total assets
Total liabilities
Total equity
Shares outstanding
Price to book
Return on assets
Return on capital
A free cash flow (FCF) statement is a financial statement that shows how much cash a company generates after accounting for capital expenditures. It is calculated by taking a company's operating cash flow and subtracting capital expenditures. FCF is important because it shows a company's ability to generate cash flow after accounting for investments in growth, and it can be used to determine a company's ability to pay dividends or make acquisitions. The FCF statement is used to evaluate a company's financial health and its ability to generate cash flow for investors and creditors.
Net income
Cash from operations
Cash from investing
Cash from financing
Net change in chash
Free cash flow
The statement of changes in shareholders' equity, also known as the statement of changes in equity or the statement of equity, is a financial statement that shows the changes in a company's equity over a specific period of time. This statement reflects the impact of transactions and events on the equity of the company, such as issuing new shares, issuing dividends, and recording gains or losses.
The statement of changes in shareholders' equity typically includes the following sections:
Share capital: This section shows the changes in the company's issued and outstanding share capital, including any new share issuances or repurchases.
Retained earnings: This section shows the changes in the company's retained earnings, including any net income or losses that the company has earned and any dividends that were paid to shareholders.
Other comprehensive income: This section shows the changes in the company's other comprehensive income, which includes items such as foreign currency translation adjustments, unrealized gains or losses on investments, and changes in revaluation reserves.
Treasury shares: This section shows changes in the company's treasury shares, which are shares that the company has repurchased but not retired.
Overall, the statement of changes in shareholders' equity is an important financial statement that provides a clear picture of the changes in a company's equity over a specific period of time, which can provide insight into a company's financial performance, growth prospects and investors and creditors can use this statement to evaluate the company's financial health and stability.
A comprehensive income statement, also known as a statement of total comprehensive income, is a financial statement that shows a company's total income, including both its net income and other comprehensive income (OCI) items. It is an expansion of the traditional income statement, which only shows net income.
The comprehensive income statement includes the following sections:
Net income: This section shows the company's income or loss from its primary operations. It is calculated by subtracting the company's expenses from its revenues.
Other comprehensive income: This section shows the company's income or loss from other sources that are not included in net income. This can include items such as foreign currency translation adjustments, unrealized gains or losses on investments, and changes in revaluation reserves.
Total comprehensive income: This section shows the sum of the company's net income and other comprehensive income.
The comprehensive income statement provides a more complete picture of a company's financial performance, as it includes both net income and other income items that are not included in the traditional income statement. This statement helps to show the company’s comprehensive performance in terms of both revenue and other comprehensive income. It also helps to understand how much company retain for future growth and how much it distribute among the shareholders. Investors and creditors can use this statement to evaluate the company's overall financial health and performance.