What are financial statement and what they means

Financial statement is essential for any company, it shows the financial situation of a company and it’s activity, it reports annually or in every quarter of the year, financial statement is essential for any company as well as owner, Investors and government, there is three statement every one of it shows certain thing about a company.

Firstly income statement
it shows the revenue and all expenses have made to generate the revenue and if the revenue were more than the expenses this mean it’s profiting and if it was the opposite it mean that a company is losing money and it’s under hardship.

Next statement is balance sheet
it’s critical because it’s the place of assets liabilities equity and debt including short and long term, which most of financial analysis are based to it and individual can know a lot about a company with understanding it for example if assets were more than liabilities it means the company has a problem, for investors they should not rely in it completely you must do all analysis and compare it with it’s sectors to get better understanding about the company situation and then decision what’s the optimal option.

Last but not least cash flow statement
it explains where, when and for who the money goes and how much money came and from what sector it did is it from the major sector or from investing in other companies it’s important statement to know especially to know I if a company has liquidity or not, the difference between cash flow statement and income statement is that cash flow is based on cash basis but income statement is based on accrual basis.



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