The balance sheet is the financial statement that shows acompany’s assets, liabilities and equity at a given point in time. The balancesheet gives investors information on liquidity and solvency. It also showsequity of a company compared to the company debt. On the balance sheet, thecompany’s assets are listed in order of their liquidity. The company’sliabilities are listed by what is due earliest.
When it comes to the equitysection, it contains the common stock, capital in excess of par and retainedearnings. Another important part of the balance sheet is that Assets equal theliabilities and stockholders’ equity. The income statement is a financial statementthat presents the revenues, expenses and income of a business over a specifictime period. Revenues represent gross income of the company during the periodof time. Expenses represent the cost of providing goods and services during agiven period of time.
Net income is the amount after expenses have beensubtracted from the revenues. The statement of cash flows is the financialstatement that shows how cash is flowing in and out of the company over a givenperiod of time. The statement of cash flows shows cash flows in a company’soperating, investing and financing activities. It also shows the overall netincrease or decrease within the company. Peoplelook at these financial statements to learn about a certain company and howthey operate.
There are many times that companies might look great but when youlook at their financial statements, a company can be losing money at a rapidrate. Investors look at these statements because it shows the potential valuein a company. If it looks like the company has growing value then investorswill be willing to invest in the company. Financial statements also reflect thereputation of the company and how they conduct business.
It helps measureprofitability, liquidity, debt and asset activity as well.