Four Financial Statements

The four financial statements in the business world include the balance sheet, income statement, cash flow statement, and shareholder’ equity. The balance sheet consists of assets, liabilities, and shareholders’ equity. The assets are what the company owns that has value. The liabilities are what the company owes to others for running the business. The shareholders’ equity is the net worth of the company; also known as capital. The income statement shows the revenue (profit or loss) a company earns within a specific time period. The expenses and cost of earning the revenue is shown on the income statement. This statement used to show all decreases and increases during a set period of time. The cash flow statement shows the company’s inflows and outflows of cash. This statement informs the company of generated cash. There are three activities of the cash flow, which include operating, investing, and financing activities that a business does within a specific time period. The shareholder’ equity statement shows the changes in the interest of the company’s shareholders over a period of time.

If there is a change in assets or liabilities than the balance sheet will be affected, and the revenue and expenses on the income statement, that shows a gain or loss for the company. The cash flow would be affected in cash; the assets would be affected on the balance sheet. These changes can affect the shareholders’ equity over a period of time; if sales are decreased, that decreases revenue and the dividends to the shareholders.

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