Financial statement? (definition)
A financial statement is a report that shows the financial activities and performance of a
business. It is used by lenders and investors to check a business’s financial health and
earnings potential.
Financial statements can cover any period of time, although they’re most commonly prepared
at the end of a month, a quarter, or a year.
...
Types of financial statement:
There are four basic financial statements in accounting:
1. Balance sheet:
A snapshot of your business’s financial condition at a single point in time, it shows what
you own (your assets) vs what you owe (your liabilities). The difference between the two is
often used as a starting point for valuing a business.
2. Income statement:
Also called a profit and loss statement, this report shows your business’s revenues and
expenses. Expenses are subtracted from revenues to show your business’s profit or loss
figure, also known as net income.
3. Cash flow statement:
Also called a statement of cash flows, this report shows changes to the cash coming in and
out of your business over a period of time. It only records cash (which may not be all of
your income), and includes amounts received from lenders and investors. A cash flow
statement shows whether you can cover short term expenses like bills and payroll.
4. Statement of changes in equity:
Also called a statement of owner's (or shareholder’s) equity, or statement of retained
earnings, this report shows how much money your business keeps (rather than pays out to
shareholders or owners). Often, these retained earnings are used to make debt payments or
are reinvested in the business.
Combined, these statements provide a good view of the financial health of your business.