Different types of financial statements Essay Example | Topics and Well Written Essays - 250 words

Different types of financial statements - Essay Example A balance sheet helps a company in analyzing its current financial position vis-Ã  -vis any other time period. A balance sheet most important for the management of a firm. The second important financial statement used is the income statement also known as profit and loss statement. The income statement is generally prepared at the end of a time period such as a quarter or a year. It gives information of the total income earned during the period and its sources. It also lists the various expenses. The difference of the two is used to calculate gross margin and net profit. Based on income statement companies take decisions on dividend declaration and future investment plans. The income statement is most significant for the investors of a firm. Cash flow statement is the third important financial statement. It helps a company to analyze the cash flows financial, operating and investment activities. This financial statement is important to understand the availability of working capital for a firm. Cash flow statement is very significant for the creditors of a firm. The fourth financial statement used is the statement of retained earnings. This statement depicts the changes in the title rights of equities if there are any. This is the least used of the four financial statements. It is also called as statement of shareholders’ equity as it calculates the money that will be left with a company after selling its assets and fulfilling its