FAQs
Financial statements are a set of documents that show your company's financial status at a specific point in time. They include key data on what your company owns and owes and how much money it has made and spent.
What won't financial statements tell you? ›
Examples may include environmental factors that impact either revenue sources or raw materials, or market demand that may impact the perception of the products or services offered. Other factors to consider are regulatory matters, competition, or changes in key customers or performance not noted until it's too late.
Which financial statement answers the question how much income? ›
Income Statement. The income statement answers a business's most important question: How much profit is it making? It is limited to a specific period of time (a month or a year) from beginning to end.
Do directors have to approve financial statements? ›
They must be prepared in accordance with applicable law and regulations and directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities, financial position and profit or loss of the company for that period.
What financial statements tell you? ›
The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. These three statements together show the assets and liabilities of a business, its revenues, and costs, as well as its cash flows from operating, investing, and financing activities.
Which financial statement is most important? ›
Types of Financial Statements: Income Statement. Typically considered the most important of the financial statements, an income statement shows how much money a company made and spent over a specific period of time.
What is a red flag on a financial statement? ›
A red flag is a warning or an indication that the stock, financial statements, or news reports of business pose a possible issue or a threat. Red flags can be any undesirable characteristic which makes an analyst or investor stand out.
What is financial statement deception? ›
Financial statement fraud occurs when financial information is intentionally misrepresented or manipulated to deceive stakeholders and create a false perception of a company's financial condition.
Why financial statements are not enough? ›
Financial Statements Do Not Cover Non-Financial Issues
The financial statements do not address non-financial issues, such as the environmental attentiveness of a company's operations, or how well it works with the local community. A business reporting excellent financial results might be a failure in these other areas.
What is the difference between P&L and balance sheet? ›
The P&L statement shows net income, meaning whether or not a company is in the red or black. The balance sheet shows how much a company is actually worth, meaning its total value.
Balance sheets are often used for ratio analysis, such as calculating a company's liquidity or solvency. Financial statements are used for trend analysis, such as comparing performance over time. Investors, creditors, and other stakeholders often use balance sheets to evaluate a company's financial health.
What is the P&L statement? ›
A profit and loss (P&L) statement, also known as an income statement, is a financial statement that summarizes the revenues, costs, expenses, and profits/losses of a company during a specified period. These records provide information about a company's ability to generate revenues, manage costs, and make profits.
Does the board approve audited financial statements? ›
Presentation of the audit report to the board of directors
During the meeting that the board of directors receives the independent audit, the appropriate action for the agenda is for the board of directors to "accept" the auditor's report and letter to management, rather than "approve" them.
Who approves the financial statements? ›
Financial statements are approved and signed by the directors before the accountants' report is signed.
Is the CEO responsible for financial statements? ›
Monitor company performance: A CEO is ultimately responsible for a company's financial performance. They may rely on financial or nonfinancial metrics to track how things are going.
What is an example of a financial statement? ›
The income statement, balance sheet, and statement of cash flows are required financial statements. These three statements are informative tools that traders can use to analyze a company's financial strength and provide a quick picture of a company's financial health and underlying value.
What is a financial statement quizlet? ›
Financial statements (or financial report) is a formal record of the financial activities and position of a business, person, or other entity. ... A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time.
What is the meaning of statement of financial? ›
A statement of financial position is another name for a balance sheet. It is used to provide an overview of a business's financial position at a given point in time.
What best describes financial statements? ›
Answer and Explanation: C) Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business decisions.
