What are Financial statements and their importance on a business? Give examples.

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Expert Solution

Financial statements are a formal record or position of the financial or monetary activity of a business or any other entity as concerned. The financial information is presented in a structured manner in the statement so that it is easy to understand. The major financial statements are: balance sheet, Income statement and the cash flow statement.

A balance sheet chart out the assets and liabilites of an entity and is presented as on date like 31st march, 2018. For example Balance sheet tells us how much cash we have if we have to make a cash purchase.
Income statement is a record of profitability of the entity and is presented for a period, which can be quarterly, semi annually or annually. Income statement for example shall tell us how much profit we made during the year or tax liability
Cash flow statement provided aggregate position of incoming and outgoing cash in the business.Cash flow statement will tell us how much we gained from selling our assets.

jeff jeffy answered 1 year ago

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