Next video:
Loading the player...

Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial performance, its current conditions and its cash flow. 

There are four sections to a company’s package of financial statements. 

The balance sheet is usually presented first. This is a list of the company’s assets, liabilities and equity ownership. The account balances are as of the date listed on the financial statement.

The income statement is next, and is a tally of the company’s operational performance for the given period. The period is stated at the top of the income statement, and most often, is for a full year. However, publicly traded companies must produce financial statements quarterly and file them with the Security and Exchange Commission.

Next is the statement of cash flows. This statement lists the various changes to the cash account during the accounting period.  It also reconciles net income or loss to changes in cash. 

The final section of the financial statements is the explanatory notes. These notes provide more detail about various line items in the financial statements, such as inventory methods used, contingent liabilities and owner’s equity. 

All financial statements provided to outside parties should be presented in conformity with standardized accounting principles.  In the US, those principles are called general accepted accounting principles (GAAP).  In other parts of the world, they are referred to as International Financial Reporting Standards (IFRS). 

Related Articles
  1. Investing

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  2. Insights

    Navigating Government and Nonprofit Financials

    Examining government & nonprofit financials can help you trace where your dollars are really going.
  3. Investing

    What Is a Cash Flow Statement?

    The Cash Flow Statement measures whether a company generates enough cash to meet its operating expenses.
  4. Investing

    Cash flow statement: Analyzing cash flow from investing activities

    Here, you'll find an overview of cash flow from investing activities — one of three primary categories in the statement of cash flows.
  5. Investing

    An Introduction To The Income Statement

    The income statement is a measurement of a company's financial performance over a specific period of time. Discover its main components and how they work together.
  6. Investing

    Cash flow statement: Analyzing cash flow from financing activities

    The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
  7. Investing

    Evaluating A Statement Of Cash Flows

    The metrics for the Statement of Cash Flows is best viewed over time.
  8. Investing

    Look For These Red Flags In The Income Statement

    Companies can overstate their revenues and understate their losses to boost investor confidence. Learn how to spot the these red flags in income statements.
Trading Center