financial statements quick overview | learn financial statements basics #Finance

when it comes to assessing the overall Financial Health of an organization business people worldwide use three key financial reports these reports known more precisely as Financial Statements are the Balance Sheet the Income statement the

statement of Cash Flows each different type of financial statement exists for a specific purpose and it provides information that other statements don’t in general Financial Statements offer their readers the following important status information

Liquidity the company’s ability to quickly convert Assets into cash to pay expenses such as payroll vendor invoices Creditors and so on General Financial condition the long-term balance between Debt and

Equity the Assets left after you deduct Liabilities owner’s Equity the periodic increases and decreases in the company’s Net Worth Profitability the ability of the company to earn

Profits Revenue that exceeds costs consistently during an extended period of Time Performance the organization’s performance against the financial plans developed by its management team or employees the Balance Sheet gives you a snapshot of

your organization’s Financial Health at an exact point in time not over a period of time you use this snapshot to determine the book value of a company’s Assets and Liabilities including Equity at a particular date before we move

forward we have a question for you do you know what the Accounting equation is here’s the Accounting equation without any context Assets equal Liabilities plus owner’s Equity the

Accounting equation is the basis for creating the Balance Sheet Assets include cash and things that you can convert to cash Liabilities are obligations Debt Loans mortgages and the like owed to

other organizations or people owners Equity is the Net Worth of your company after you subtract all the Liabilities from the organization’s Assets in the Balance Sheet Assets are listed in

order from the most liquid readily convertible to cash to the least liquid Liabilities and owner Equity are listed in the order in which your company plans to pay them note you can convert current Assets to cash within a year current

Liabilities are scheduled to be paid within a year the Balance Sheet demonstrates the fact that a company’s Liabilities and owner’s Equity pay for its Assets conversely the company uses its

Assets to generate cash to pay off its Liabilities any excess cash gains is added to owner’s Equity the number one reason that businesses exist is to make money to make a Profit for their owners because making money is such

an incredibly important part of the day-to-day focus of a business companies need a quick and easily understood way to figure out how much money they’re making such a tool exists the Income statement an Income statement also known as a Profit

and loss statement a pnl a report of earnings or a statement of Income and losses gives its readers three key pieces of information the business’s sales volume During the period of the report the business’s expenses during the period of the report the difference between

the business’s sales and its expenses its Profit or loss During the period of the report for any business cash truly is what matters it takes cash to pay employees to purchase supplies to pay bills and to execute many more business functions the Cash Flow

statement also known as a statement of Cash Flows by some is a specialized report that tracks the sources of cash in a company as well as its inflows money coming into the business and outflows money going out of the business the statement is an extremely valuable tool for ensuring

that your company has the cash it needs to meet its obligations when you need it this can mean the difference between keeping your business afloat and watching it sink the business World features a number of different kinds of Cash Flow statements each one suited to a particular

business need some work best strictly inside a business buiness and some work best outside of business for investors Creditors and other interested parties here are a few of the most common types of Cash Flow statements simple Cash Flow statement

or cash budget arranges all items into one or two categories most often cash inflows and cash outflows operating Cash Flow statement limits analysis of Cash Flows to only items dealing with the operations of a business not its financing financing Cash

Flow statement includes cash raised by issuing new Debt or Equity Capital as well as expenses incurred for repaying Debt or paying Dividends on stock statement of Cash Flows often an

external statement that depicts the periodt period changes in Balance Sheet items and the actual ual dollar amount for the period in question for Income statement items this statement shows the following categories operating cash inflows operating cash outflows

priority outflows such as interest expense and current Debt payment discretionary outflows such as equipment expense Financial flows things you borrow or changes in Equity e