What are some common financial statements used in business and how do they differ?

Common Financial Statements in Business

Financial statements are essential tools for assessing the financial health of a business. Some common financial statements used in business include:

1. Balance Sheet: This statement provides a snapshot of a company's financial position at a specific point in time. It lists assets, liabilities, and shareholders' equity.
2. Income Statement: Also known as the profit and loss statement, this document shows the company's financial performance over a specific period. It details revenues, expenses, and net income.
3. Cash Flow Statement: This statement tracks the cash entering and leaving the business over a given period. It helps assess the company's liquidity and ability to meet its financial obligations.

Key Differences

These financial statements differ in terms of the information they provide and the perspective they offer on a company's financial situation:

• The balance sheet focuses on the company's assets, liabilities, and equity at a specific moment, providing a snapshot of financial position.
• The income statement highlights the company's revenues, expenses, and profits or losses over a period, showing its operational performance.
• The cash flow statement reveals how cash is generated and used by the business, offering insights into liquidity and cash flow management.

By analyzing these financial statements collectively, stakeholders can gain a comprehensive understanding of a company's financial performance and make informed decisions about its future.