The Main Types Of Financial Statements

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The three main types of financial statements¬—balance sheets, income statements, and statements of cash flows—provide essential information about a firm when tracking a company’s performance. These financial statements are provided and distributed by firms in the form of an annual report. As noted by Ciuhureanu, Baltes, & Gorski (2009), financial statements are essential to business management because “they are the fundamental information means of communication towards users” (p. 166). At a high level, company performance is best monitored through profit and loss values on each financial statement. Closer examination of these three types of financial statements reveals firm-specific details about company performance.
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For the benefit of investors, firms will also report net income on a per-share basis. Major expenses outlined on income statements are typically of a fixed and stable nature. Advertising costs and salaries are good examples of expenses found on income statements.
Balance Sheet As outlined by Melicher & Norton (2013), the balance sheet is “a statement of a company’s financial position as of a particular date” (p. 358). While income statements demonstrate a company’s performance over a length of time, the balance sheet provides a “snapshot” of a firm’s revenues and expenses on a specified date. The most important values presented on a balance sheet are the values for liabilities, assets, and equity. Different types of assets and liabilities noted within a company’s balance sheet can reveal information about the company’s financial structure and plans for future operations. A balance sheet is “balanced” because every dollar listed as an asset must be financed by a dollar of liabilities. Major assets appear on the balance sheet in order of liquidity. Examples of assets included on this financial statement include cash (or cash equivalents), accounts receivable, inventories, and other fixed and long-term assets. The claims of creditors and owners are all the debts that the business owes to other parties. On the balance sheet,
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