• What it is: A snapshot of a company's financial position at a specific point in time.
• What it provides: * Assets: What the company owns (e.g., cash, accounts receivable, inventory, property, equipment).
• Liabilities: What the company owes to others (e.g., accounts payable, loans, deferred revenue).
• Equity: The owners' stake in the company (e.g., common stock, retained earnings).
• Key Equation: Assets = Liabilities + Equity
• Purpose: Shows the company's overall financial health and how its assets are financed.

2. Income Statement (Profit and Loss Statement)

• What it is: Reports a company's financial performance over a period of time (e.g., a month, quarter, or year).
• What it provides: * Revenues: Money generated from sales of goods or services.
• Expenses: Costs incurred to generate revenue (e.g., cost of goods sold, salaries, rent, utilities).
• Profit (Net Income): Revenues minus expenses.
• Purpose: Shows how profitable the company is and how effectively it's managing its expenses.

3. Statement of Cash Flows

• What it is: Tracks the movement of cash both into and out of a company over a period of time.
• What it provides:
• Cash from Operating Activities: Cash generated from the company's core business operations.
• Cash from Investing Activities: Cash related to investments, such as buying or selling property, plant, and equipment.
• Cash from Financing Activities: Cash related to financing, such as issuing stock, borrowing money, or paying dividends.
• Purpose: Shows how the company is generating and using cash, which is crucial for its short-term and long-term sustainability.

4. Statement of Changes in Equity

What it is: Shows how a company's equity has changed over a period of time.

What it provides:

• Changes in retained earnings (profits reinvested in the business).
• Issuance or repurchase of stock.
• Payment of dividends.
• Other comprehensive income (e.g., unrealized gains or losses).

Purpose: Provides a detailed breakdown of the changes in the owners' stake in the company.

Why These Statements are Important

• Investors: Use them to assess the company's financial performance, profitability, and risk.
• Creditors: Use them to determine the company's ability to repay loans.
• Management: Uses them to make informed business decisions, track progress, and identify areas for improvement.

Important Notes:

These statements are interrelated and should be analyzed together to get a complete picture of a company's financial health.

Financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) to ensure consistency and comparability.

It's essential to have a basic understanding of financial statements to make informed decisions about investments, lending, or business operations.