Balance sheet
This financial statement demonstrates the value of an organization’s Assets, Liabilities and share holder’s equity. It shows the net worth of a company at a certain time. It gives a complete picture of the ways in which the company’s assets are financed. It also predicts the future methods, a given company will use for financing to meet its financial demand.
The three main points a finance person will observe in a balance sheet are liquidity, leverage and net worth. Leverage is the ability of a company to meet its obligations in short term. Leverage and net worth show its ability to sustain for a longer period of time.
Income statement
The income statement or the profit and loss statement, reports the revenues, profits, losses and expenses of the company in a given time frame. There are many times during the period of growth, when companies have to show this statement in order to justify their profits claimed. This acts as a proof that the company has an ability to generate future profits in such times.
The statement of cash flows
The cash flow statement identifies the amount of cash that flows in and out of the business. The cash flows are estimated specifically for financing, operating and investing activities. This financial statement makes the business owner aware of the amount of capital needed for the running of the company, also showing whether the cash reserves are too high or too low. In case of high cash reserves, future investments are made otherwise they are declined. This statement also reflects the amount of cash utilized to meet the expenses
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