Question

In your own words, describe each of the four financial statements. Go online and find the most recent set of financial statements for a publicly traded company that you are interested in, and explain what you learned about that company from exploring its financial statements.

Answer 1

The Four Financial Statements are as follows:

1) Income Statement

2) Statement of Owner's Equity

3) Balance Sheet

4) Statement of Cash Flows

1. Income statement:

Income statement tells us whether business is profitable or not by sharing reports on revenue, expenditure.it is for a specific period of time like for a month ,a quarter or a year. It allow users to compare profit or loss of company from previous years and also from any other company.

This is usually considered the most important of the financial statements, since it presents the operating results of an entity.

2. Statement of owner's equity:

Statement of owner's equity describes how the entity changes its retained earnings. The report format varies, but can include the sale or repurchase of shares, dividend payments, and changes caused by reported profits or losses.

It reconciles the various components of Owner's equity on the balance sheet for the start of the period with the same items at the end of the period.

3. Balance Sheet:

Balance sheet presents the amount of Assets, Liability, Shareholder's equity of the entity as of the reporting date. Thus, the information presented is as of a specific point in time. The balance sheet tells us whether the company can pay its bills on time, its financial flexibility to acquire capital and its ability to distribute cash in the form of dividends to the company's owners.

Key Accounting Equation :- Assets = Liabilities + Owners Equity

4. Statement of Cash Flows:

The cash flow statement tells us the sources and uses of cash during the period. This can provide a useful comparison to the income statement, especially when the amount of profit or loss reported does not reflect the cash flows experienced by the business.

It provides information about company's Operating, Investing and Financing Activities. It is also for a period of time like a month, a quarter or a year.