Financial statements are super important. They contain valuable information about a company’s financial position. They can also help individuals to decide whether to invest in the company or not. Financial statements are important pieces of information for banks that are loaning money to a business. Financial statements are also valuable for businesses selling stock on the stock market. Businesses are required to file reports with appropriate agencies. Financial statements must contain a strong command of finance and accounting standards.
Businesses generally issue financial statements every quarter. It is super important for a business to file these reports on time. The government also has the power to hand out fines if financial statements are not filed. It is also important that companies do not fudge their financial statements in any way. This is because investors will not want to finance a company that could be hiding something that is misleading, suspicious or illegal.
It is important to understand that there is a difference between a financial statement and financial reporting. Financial statements are a snapshot of an organisations. Financial reporting is the process of preparing these reports. This means that financial statements can also be used as part of the financial reports process.
Here is some important about the four main types of financial statements.
A balance sheet is a snapshot of an organisation’s financial health. It contains valuable information about what the company owns and what it owes. A balance sheet is divided into three sections, which include assets, liabilities and equity. This is a good indication of a company’s financial condition.
Cash Flow Statement
A cash flow statement details how the company has used and produced cash over a certain time period of time. It also provides information about what the company planned to spend money on. You can compare this with how much cash they actually spent. Cash flows are generally income minus direct expenses.
Cash flow planning is crucial because as a business owner you need cash in the bank to pay your bills. Staying on top of your cash flow will help you predict if you’re going to run out of money and when, this way you can prepare ahead of time. Cashflow planning might also show you that you need to cut overheads, find new investment, or spend time generating sales.
Furthermore, your business might be doing well, and you might be considering expanding into new markets, investing in new products, taking on bigger premises, or recruiting new staff. Having accurate cash flow projections will help you see if you can afford to take the leap.
An income statement contains information about what the company has earned. This is usually broken down into quarters or years. An income statement outlines how much revenue came in. It also reveals what the company spent to earn that money during the timeframe that is being reported.
Shareholder’s Equity includes the capital stock owned by all of the business’s shareholders, paid-in capital and retained earnings. Paid-in capital can be further broken down into different types of contributed capital. These include common stock, preferred stock and paid-in retained earnings. The financial activities have the potential to impact stock prices for shareholders.
The team at Vault are here to help. We offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT ((07) 3012 6724).