Financial statements summarize a company’s performance and financial position over a given period.
There are three main financial statements: the balance sheet, the income statement and the cash flow statement.
The balance sheet summarizes what the company owns (offices, plants, etc.) and what it owes (debt, equity, etc.). The income statement shows company’s income and expenses. For example, on this statement you will find net profit. The cash flow statement shows the state of cash inflows and outflows.
The financial statements of listed companies must be formatted in accordance with one of the standard presentation standards. In Canada, companies adhere to International Financial Reporting Standards (IFRS).
The primary purpose of the financial statements is to assist in decision-making. A company’s stakeholders rely heavily on these documents to understand how it is operating.