includes Financial Statements key takeaways

1. Financial Statements:
Financial statements are written records that convey the business activities and the financial
performance of a company. Financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes.
Financial statements include:
• Balance sheet
• Income statement
• Cash flow statement.
KEY TAKEAWAYS
• Financial statements are written records that convey the business activities and the
financial performance of a company.
• The balance sheet provides an overview of assets, liabilities, and stockholders' equity
as a snapshot in time.
• The income statement primarily focuses on a company’s revenues and expenses during
a particular period. Once expenses are subtracted from revenues, the statement produces
a company's profit figure called net income.
• The cash flow statement (CFS) measures how well a company generates cash to pay
its debt obligations, fund its operating expenses, and fund investments.
Investors and financial analysts rely on financial data to analyze the performance of a company
and make predictions about its future direction of the company's stock price. One of the most
important resources of reliable and audited financial data is the annual report, which contains
the firm's financial statements.
The financial statements are used by investors, market analysts, and creditors to evaluate a
company's financial health and earnings potential. The three major financial statement reports
are the balance sheet, income statement, and statement of cash flows.
Vertical Income Statements
An income statement is one of the three important financial statements used for reporting a
company's financial performance over a specific accounting period. Also known as the profit
and loss statement or the statement of revenue and expense, the income statement primarily
focuses on a company’s revenues and expenses during a particular period.
Vertical income statement may be divided into Manufacturing Account, Trading Account,
Profit & Loss Account and Profit and Loss Appropriation Account. Revenue Account is
prepared for a period, covering one year.
Prof. Suhas Kharat
Shri. S.H.Kelkar College, Devgad
9403350436

2. The horizontal format which is traditional in nature is suitable to the owners. The owners can
understand. It is not suitable for financial analysis. It is designs for owners only. Hence the user
of financial statements converts the horizontal format into vertical format. It is suitable for
financial analysis.
Vertical Balance Sheet:
Vertical form of balance sheet does not demonstrate just financial position but it also
shows the flow of fund in one year. We can create our balance sheet in such shape for knowing
the exact position of our funds. If we include the previous figures of liabilities and assets, then
we need not to make fund flow statement because to show the comparison of two
period vertical balance sheets is just like fund flow statement. In short cut, it fulfills the
requirement of fund flow analysis. One more mystery can be analyzed with this form of balance
sheet.