A financial statement presents the financial activities and position of a farm business in a structured manner to be easily understood. Financial statements have three objectives: to provide information on the financial position, performance, and cash flow of the business over time; to aid business decisions that affect continued operations; and to help financial institutions and governments assess the business and make funding or planning decisions. Generally, three types of basic financial statements are used: the balance sheet, profit and loss statement, and cash flow statement.

1. Farm Financial Analysis Tool:
Financial Statement Defined:
A financial statement which is also known as financial report is a formal record
of the financial activities of a farm business or enterprise, all the relevant
financial information are to be presented in a well defined and structured
manner which must be easy to understand, known as the financial statements.
Objectives:
 To provide information about the financial position, performance and changes
in financial position of a farm business or enterprises at a particular point of
time.
 Financial statement is useful to make wide range of important business
decisions that affect its continued operations
 Financial institution can make use of financial statements to assess the
variability of a farm business for advancing the loan, thus used to make
decision whether loan to be grant or not.
 Useful for tax authorities and government to make better plans for the country

2. Generally three types of basic financial
statements are identified as-
1. Statement of financial position:
e.g. Balance sheet
2. Statement of comprehensive income:
e.g. Profit and loss statement
3. Statement of cash flows:
e.g. flow of funds statements which shows farm
business cash flow activities includes operating
, investing and financing activities