Understanding Financial Statements: Income Statement, Balance Sheet, Cash Flow Statement, and Statement of Shareholders’ Equity

Four Financial Statements

income statement, retained earnings statement, balance sheet, statement of cash flows

1) Income Statement: The income statement shows how much revenue a company generates during a specific period of time and what expenses the company incurred to generate that revenue. It is used to determine the company’s profitability by subtracting expenses from revenue to calculate net income. The income statement is also called the profit and loss statement or P&L.

2) Balance Sheet: The balance sheet is a statement that provides a snapshot of a company’s financial position at a specific point in time. It shows a company’s assets, liabilities, and equity. The balance sheet is used to help investors and analysts understand a company’s financial position and its ability to meet short-term and long-term obligations.

3) Cash Flow Statement: The cash flow statement tracks the movement of cash in and out of a company over a specific period of time. It is divided into three sections: operating activities, investing activities, and financing activities. The cash flow statement is used to determine a company’s liquidity and its ability to generate cash to meet its obligations.

4) Statement of Shareholders’ Equity: The statement of shareholders’ equity shows changes in a company’s equity over a specific period of time. It includes items such as issuance or repurchase of stock, dividends paid, and changes in retained earnings. The statement of shareholders’ equity is used to track changes in a company’s equity position and to understand the impact of those changes on the company’s financial performance.

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