The tables that give detailed information showing the financial status of the enterprises for a certain period are called financial statements. Income statements and balance sheets provide detailed information about the assets of the enterprises and the monetary values of these assets.

 

What is a Financial Statement?

Money management, which is very important for the individual, is also very critical for businesses running a larger organization. All of the daily, weekly, monthly and as a result of all of these, the annual income and expense statements of a business are called financial or financial statements.

 

How Are Financial Statements Arranged?

Organizing financial statements ensures that a business can properly manage its money. It is possible for businesses to access all the information they need to manage money efficiently and effectively with financial statements and the analysis to be made on them. (You can make detailed analysis and reporting with our WOLVOX ERP program.)

 

The data showing whether the financial risks are revealed or whether the company's targets are realized or not can be accessed through financial statements. At the same time, financial statements are needed to take loans, act in accordance with the law, attract investors and predict future risks with the help of tables.

 

Important Indicators in Financial Statements

The share of each item in the financial statements in the total amount is checked. These tables are important indicators used to understand the rational balance sheet balance and sensitivity, such as the efficiency of fixed asset investments, which resources are effective in financing the firm's activities, and the ratio of costs to sales.

 

In order to make an interpretation by comparing the values ​​in the financial statements, it is also necessary to make an evaluation with ratio analysis such as debt ratio, current ratio, net working capital. Comparing the values ​​of the records in the income and balance sheet in different periods is the most frequently applied banking analysis in order to see the financial change and development of the business over time.

 

Income Statement

The income statement, unlike the balance sheet, spans a period of time, usually a year for yearly financial statements and a quarter for quarterly financial statements. Revenues, expenses, net income, and earnings per share are all summarized in the income statement.

 

Revenue

The revenue generated by selling a company's products or services is referred to as operating revenue. The production and sale of automobiles provide operating revenue for an automobile manufacturer. Operating revenue is generated by a company's fundamental business activities.

 

The income generated by non-core company operations is referred to as non-operating revenue. These earnings are unrelated to the company's principal mission. Examples of non-operating revenue include:

 

Interest is paid on money in the bank.

Rental revenue is a type of income that comes from a property.

Royalty payment receipts, for example, are a source of income from strategic alliances.

Profits from an advertisement display on the business's property

The revenue generated by other activities is referred to as "other income." Gains from the sale of long-term assets such as land, automobiles, or a subsidiary are examples of other revenue.

 

Expenses

Primary expenses are incurred as a result of the primary activity of the firm generating revenue. Cost of goods sold (COGS), selling, general and administrative expenditures (SG&A), depreciation or amortization, and research and development are all examples of expenses (R&D).

 

Employee salary, sales commissions, and utilities like energy and transportation are all common expenses.

 

Interest payments on loans or debt are examples of secondary activity expenses. Losses incurred as a result of the sale of an asset are also accounted for as expenses.

 

The income statement's principal goal is to express information of profitability and financial results of corporate activities; but, when compared across numerous periods, it may be quite useful in revealing if sales or revenue is increasing.

 

What Are the Three Key Financial Statements?

The balance sheet, income statement, and cash flow statement are the three most essential financial statements. These three financial statements reflect a company's assets and liabilities, revenues and costs, and cash flows from operating, investing, and financing activities.

 

What Are the Most Important Financial Statement Items?

Revenues, costs of goods sold, taxes, cash, marketable securities, inventories, short-term debt, long-term debt, accounts receivable, accounts payable, and cash flows from investing, operating, and financing activities are the most typical line items in a financial statement.

 

What Are Financial Statements' Advantages?

The financial statements of a company demonstrate how it runs. It reveals how much money a company makes and how it makes it, as well as what its operating costs are, how well it manages its cash, and what its assets and liabilities are. Financial statements give you all the information you need to know about how successfully or poorly a firm is run.

 

We hope that this blog post will be beneficial for you. We will continue to create useful works in order to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.  

You can get your Financial Statements Data with Finage free Fundamentals Data API key.

Build with us today!

Start Free Trial