Financial Statements

Financial Statements

Introduction

Financial Statements show the financial position of the company and how it performed the whole year. This is an important document which presents the financial information of the company in a structured form which helps the company and the investors to study the company deeply. When an investor is looking to invest in the company, these statements help him in ensuring that the company is profitable and has been doing well all these years. There are four different types of financial statements (Woelfel, 1993):

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Changes in Equity

Discussion

The different types of financial statements have different types of functions. They are of different use to different people and help them accordingly. For the investors, the balance sheet and the income statement are the two important financial statements that help them to decide whether they should invest in the company or not. The prospective investors make use of these statements and with the help of the different financial experts and analysts they decide whether they should invest in the company or not. They assess the viability of the business while deciding whether the company is good for investment or not (Fridson & Alvarez, 2011).

Another aspect of financial statements is that they are used by the company, as well. The company is able to compare its performance with last year, as well as, with the other companies in the same industry. This helps them to keep a track on their performance and also helps in ensuring that they are doing their job in the best possible manner. It also helps them in making important financial decisions based on the financial performance of the company. The financials of the company help it in making sure that they take the right decisions and also make sure that they are ...