Financial statements are reports issued by a company that describe the financial activities of the company.
The financial statements are broken down into three different statements:
- Income Statement - shows the income and expenditure of the company, including things such as depreciation, income tax, interest income etc.
- Balance Sheet - shows the assets, liabilities and shareholders equity of a firm; it must always balance (i.e. assets = liabilities + shareholders equity).
- Cash Flow Statement - shows the inflows and outflows of cash and shows whether the firm is actually making or losing money.
Financial statements are usually issued on a quarterly and / or yearly basis and are audited by independent firms. The future performance of a firm is modeled using the financial statements and projecting into the future using appropriate assumptions.
- Balance Sheet (BS)
- Cash Flow Statement (CFS)
- Generally Accepted Accounting Principles (GAAP)
- Income Statement (IS)
- Shareholders Equity (SE)
- Securities & Exchange Commission (SEC)