
he purpose of financial statements is to provide information about a company’s financial performance, position and cash flow. They are used by a wide range of stakeholders, including investors, creditors, customers, suppliers, and management, to evaluate the company’s financial health, make informed decisions, and assess the company’s ability to meet its financial obligations.
Overall, financial statements are an important tool for understanding a company’s financial performance and position, and they provide valuable information to a wide range of stakeholders. They are used to evaluate the past, present and forecast the future of a company.
There are four main financial statements that a business owner should understand: the balance sheet, the income statement, and the cash flow statement.
A profit and loss (P&L) statement, also known as an income statement, is a financial statement that shows a company’s revenues and expenses over a specific period of time, such as a month or a year. The statement is used to measure the company’s profitability, and it is one of the most important financial statements for a business owner to understand. The statement typically includes the following elements:
Overall, these financial statements are essential for a business owner to understand because they provide insights into the company’s financial health and performance, which can help the owner make informed decisions about the direction and management of the business.