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Financial statements, with all the uncommon jargon and numbers floating around, can be
intimidating to the uninformed. At the most basic level financial statements show us where
the money is*ƒ²*ƒ"€šwhere it came from, where it went, and where it is now. A financial
statement could be thought of as a snapshot of a company financial position at a specific
time. There are four main financial statements. They are: (1) balance sheets; (2) income
statements; (3) cash flow statements; and (4) statements of shareholder equity (Securities
and Exchange Commission, 2007). Let discuss the types of financial statements, and who
they are directed towards, in more depth.
Financial statements are sometimes simply called "financials."“ Balance sheets, income
statements, and cash flow statements are all included in outside distributed reports to
stockholders and debt holders (Tracy, 2005). If your business is a public business, these
reports must also be filed with the Security and Exchange Commission (SEC), thus
becoming public record. Contrastingly, financial reports of private businesses are only sent
to owners and lenders of that business.
So what are the differences between the different types of financial statements: (1) balance
sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholder
equity? Does a "balance sheet"“ show how a company balances out its monies? Do income
statements tell us about every penny earned? Is the flow of money in and out of the
business explained in a cash flow statement? Finally, how much is the shareholder equity
truly worth?
Balance sheets provide detailed information about s company assets, liabilities, and
