What is the Importance of having financial statements in a company (eg: Balance sheet, profit and...

What is the Importance of having financial statements in a company (eg: Balance sheet, profit and loss, trial balance, and journal report).

please write it in paragraphs

Thank you

Expert Solution

Financial statements are important because they consists of information about financial health of a company. Financial statements help companies in making decisions by identifying the area in which the company generates high ROI. By publishing financial statements, management can communicate with investors, shareholders, creditors etc.

The main financial statements are the income statement, balance sheet, cash flow statement, and statement of shareholders equity. The income statement easily tells an investor or manager how much revenue was generated and what the expenses are. The balance sheet is important for investors and managers due to it being a statement of the firm's overall health. The statement of cash flows is often overlooked, but it tells a great deal of information about a firm’s health. The statement shows the cash flow in and out of the firm which is the most crucial matter for a company. The statement of shareholders’ equity is submitted along with the firm’s balance sheet. The statements tell investors or managers how the company’s equity position has changed and the reason of the change.

ekkarill92 answered 2 years ago

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