Basic Financial Statements Flashcards, test questions and answers

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What is Basic Financial Statements?

The basic financial statements are a set of financial documents that provide an overview of a company’s financial performance and position. These documents include the balance sheet, income statement, cash flow statement, and statement of changes in equity. They are used by investors and creditors to evaluate the health of a business and make informed decisions about investing or lending money.The balance sheet is a summary of a company’s assets, liabilities, and shareholders’ equity at a specific point in time. It provides information on what the company owns (assets) as well as what it owes (liabilities) to others. The difference between these two figures is known as shareholders’ equity which represents the owner’s investment in the business. By looking at this statement, investors can easily determine if the company has enough resources to cover its debts or if it needs additional funding from outside sources such as debt or equity financing.The income statement shows how profitable or unprofitable a company has been over a specific period of time. It consists of revenue generated from sales as well as expenses incurred related to running operations such as wages and taxes paid by businesses during this period. By evaluating this document, lenders can assess how efficiently management is running the business while investors can determine potential dividend payouts based on how much profit remains after expenses have been accounted for. The cash flow statement provides an analysis of all money coming into (inflow) and out (outflow) from the business over a given period of time including operating activities such as sales; investing activities such investments made into equipment; financing activities like debt payments; and other transactions like dividends paid out to shareholders during this same period. This document helps users understand where funds are being allocated within the business so they can make informed decisions about their investments or lending practices accordingly. Finally, The Statement Of Changes In Equity provides insight into any changes in ownership within the company due to dilution resulting from issuing additional shares for example or non-cash transactions like stock splits or mergers & acquisitions activity that may occur during this same period. This document helps users understand who owns what portion of shares within the organization so they can better gauge voting power among shareholder groups should any major decisions need to be approved at future meetings. All together these four basic financial statements provide an invaluable overview for investors , creditors , managers , board members , researchers , analysts , auditors & regulators alike when evaluating companies both large & small .