Financial statements, with all the uncommon jargon and numbers floating around, can be intimidating to the uninformed. At the most basic level financial statements show us where the money is—where it came from, where it went, and where it is now. A financial statement could be thought of as a snapshot of a company’s financial position at a specific time. There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholder’s equity (Securities and Exchange Commission, 2007). Let’s discuss the types of financial statements, and who they are directed towards, in more depth.
Financial statements are sometimes simply called “financials.” Balance sheets, income statements, and cash flow statements are all included in outside distributed reports to stockholders and debt holders (Tracy, 2005). If your business is a public business, these reports must also be filed with the Security and Exchange Commission (SEC), thus becoming public record. Contrastingly, financial reports of private businesses are only sent to owners and lenders of that business.
So what are the differences between the different types of financial statements: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholder’s equity? Does a “balance sheet” show how a company balances out its monies? Do income statements tell us about every penny earned? Is the flow of money in and out of the business explained in a cash flow statement? Finally, how much is the shareholder’s equity truly worth?
Balance sheets provide detailed information about s company’s assets, liabilities, and shareholder’s equity. An as ...