Accurate information is the key to operating a business successfully and smoothly, and financial information is especially important to sustaining a company. This information is presented in the four clear and concise layouts of financial statements. Rather than combine all of a company’s financial information into a single, extensive report, the information is divided into Balance Sheets, Income Statements, Earned Income Statements, and Cash Flow Statements. Each of these provides important details relating to the overall health of the company’s financial standings. The Balance Sheet is a basic report of a company’s assets and liabilities, which allows the reader to see what the company is worth by showing what is owned and what is owed. This information is important to creditors and investors because a company can appear to be doing well but in reality, it could be drowning in debt with no viable way to pull itself out. When a company has few assets and high liabilities, it could signify a company that is in trouble, or it could be evidence of expansion. For internal use, this statement helps management to see their current financial state and make payments and collections accordingly to bring their accounts current. Whatever it is used for, this information is vital, but it is important to analyze this information in conjunction with the other financial statements to determine if a company can recover from a period of high liability.
Income Statements provide a glimpse of the company’s revenues and expenses for a period of time. It is typically presented by showing the revenues for the specific period and then providing a breakdown of expenses and the net income or loss for the period. This provides an overview of how a company performs within their averages. By viewing performance annually, quarterly and monthly, periods of higher and lower