Three Financial Statements

What are the Three Financial Statements?

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.

 

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