What is in a Financial Statement?

A financial statement (sometimes called a financial report) is a formal record of the financial activities of a corporation, business, or person. They are issued periodically to assess the financial success of the entity. These statements show the financial condition of the company in short- and long-term periods, which makes it easier to understand the condition of the business. Several documents make up the full financial statement. They include:

• Balance sheet – this is sometimes called the statement of financial position or condition. It reports the company's assets, liabilities, and ownership equity for a given period of time.
• Income statement – this is often called the Profit and Loss statement (or "P&L"). It reports the company's income, expenses, and profits over a period of time. The Profit & Loss also gives information on the corporation's operation, including sales and expenses during the period.
• Statement of retained earnings – this statement clarifies the changes in the company's retained earnings over a period of time.
• Statement of cash flows – this statement reports specifically on the company's cash flow activities, in particular its' operating, investing, and financing activities.
• For big operations, the financial statement is often quite complex, and preparers including extensive notes for management to analyze and discuss. Notes often refer in detail to each item on the balance sheet, income statement, and cash flow statement. These notes also help potential investors and shareholders understand the financial situation of the entity, and they are an essential part of each financial statement.
• Financial statements should contain all relevant information to the financial status of the business, but they should be easy enough to read that someone relatively familiar with the business can understand and analyze them. Investors use them to choose companies to invest in, owners use them to analyze the success of the business, employees can use them to analyze their position and as evidence of profit in collective bargaining, and financial institutions can use them to assess whether to loan the company money or not.

Financial statements are required for all publicly-traded companies. They are usually issued quarterly, but some companies choose to issue them annually or semi-annually. The financial statement is an integral part of any business accounting, and they help management make financial choices that will benefit the company.