What are Financial Statements Essay Example | Topics and Well Written Essays - 750 words

What are Financial Statements - Essay Example The main objective of financial reporting is to transfer the information, whether qualitative or quantitative, about a certain business to others who are interested in investing. Financial reporting provides financial information regarding the corporation’s capital investors, creditors and lenders who have to make decisions on their ability as capital providers. It is as a summary of the performance, or capability, in increasing, managing, and utilization of the capital by an entity. Financial reporting is represented by four types of financial statements which show the company’s financial position. These financial statements are quite exacting and provide a quantitative overview of the company’s financial health. The balance sheet represents the financial situation of a company by giving the assets, liabilities, and owners equity at a particular point in time or it points outs the company's net worth. Assets are economic benefits held a company due to its past transactions. Secondly, liabilities are the debts and obligations that a company had because if the company’s past transactions. The income statement, also known as the profit and loss statement shows the company’s net profit or loss during a given period of time by reporting the company’s earning to its investors. The third statement, the statement of cash flow reports the cash flow for the operating, financing and investing activities. Lastly, the statement of retained earnings reports the changes in the retained earnings of the company. Financial statements also include notes which give supplementary information about the company’s financial situation by describing the principles used in the accounting format, the explanation of the information in the statements or some other explanation that is not part of the statement.   Financial statements also help in the calculation of the financial ratios which are used to assess and estimate the financial situation of the company and these also of assistance in analyzing the statements themselves.  Ã‚