Definition of Financial Statement

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Financial statements are a set of four most significant reports of a business corporation or of an organization.

It tells about the overall health of a business in terms of finance.

A standard set of Financial statements include:

  • Balance Sheet or Statement of Financial Position
  • Income statement or Statement of Income
  • Cash Flow statement or Statement of Cash Flow
  • Statement of changes in equity

Users of financial statements mostly rely upon financial data to analyze the performance of a business or company.

Investors, creditors, market analysts, shareholders, and all other interested groups use financial data provided in financial statements. They use it to evaluate business performance, potential earnings, market price assumption, growth strategy etc.

Financial statements are audited by professional accountants, government agencies and other responsible organizations to ensure its materiality and accuracy.

A company pays tax and other government charges based on its financial data shown in audited financial statements.

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