B F

• Financial statements are written records that convey the financial activities of a company.
• Financial statements are often audited by government agencies and accountants to ensure accuracy and for tax, financing, or investing purposes.
• For-profit primary financial statements include the balance sheet, income statement, statement of cash flow, and statement of changes in equity.
• Nonprofit entities use a similar but different set of financial statements.
• Financial statements provide interested parties with a company's overall financial condition and profitability.
• Statements required by Generally Accepted Accounting Principles are the balance sheet, the income statement, and the statement of cash flows, but you'll likely see more in reports.
• The balance sheet provides an overview of assets, liabilities, and shareholders' 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) tracks how a company uses its cash to pay its debt obligations and fund its operating expenses and investments.
• Investors and financial analysts rely on financial data to analyze a company's performance and make predictions about the future direction of its stock price.
• The annual report, which contains the firm's financial statements, is a crucial resource of reliable and audited financial data.
• The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.
• Investing activities on a cash flow statement include cash flows from purchases or sales of long-term assets such as property, plant, and equipment (PPE), and changes in equipment, assets, or investments.
• Financing activities on a cash flow statement include cash flows from borrowings or repayments of debt, and cash flows from issuance or repurchase of equity.
• Operating activities on a cash flow statement include cash receipts from sales of products or services, cash payments for expenses, and changes in accounts receivable.
• The statement of comprehensive income summarizes standard net income while also incorporating changes in other comprehensive income (OCI), which includes all unrealized gains and losses that are not reported on the income statement.
• The statement of changes in equity tracks total equity over time, tying back to a balance sheet for the same period.
• The formula for changes to shareholder equity will vary from company to company, but it typically includes beginning equity, net income, dividends, and other comprehensive income.
• Examples of transactions that are reported on the statement of comprehensive income include net income, unrealized gains or losses from debt securities, unrealized gains or losses from derivative instruments, unrealized translation adjustments due to foreign currency, and unrealized gains or losses from retirement programs.
• Statement of Activities: This is the equivalent of a for-profit entity's income statement.
• Nonprofit organizations record financial transactions across a similar set of financial statements, including a statement of financial position and a statement of activities.
• Not all financial statements are created equally; the rules used by U.S companies are called Generally Accepted Accounting Principles, while the rules often used by international companies are International Financial Reporting Standards (IFRS).
• U.S government agencies use a different set of financial reporting rules.
• The statement of functional expenses reports expenses by entity function (often broken into administrative, program, or fundraising expenses) and is distributed to the public to explain what proportion of company-wide expenditures are related directly to the mission.
• The statement of activities is the equivalent of a for-profit entity's statement of income and tracks the changes in operation over time, including the reporting of donations, grants, event revenue, and expenses to make everything happen.
• The balance sheet reports a company's financial health through its liquidity and solvency, while the income statement reports its profitability.
• The purpose of an external auditor is to assess whether an entity's financial statements have been prepared following prevailing accounting rules and whether any material misstatements are impacting the validity of results.
• Financial statements can be compared to prior periods to understand changes over time better and can also be read by comparing the results to competitors or other industry participants.
• Generally Accepted Accounting Principles (GAAP) are the rules by which publicly-owned United States companies must prepare their financial statements.
• A statement of cash flow ties these two together by tracking sources and uses of cash.
• Together, these financial statements attempt to provide a more clear picture of a business's financial standing.
• Financial statements are the ticket to the external evaluation of a company's financial performance.
• Nonprofit entities do not have equity positions; any residual balances after all assets have been liquidated and liabilities have been satisfied are called "net assets."
• International companies may use a similar but different set of rules called International Financial Reporting Standards (IFRS).
• Financial statements provide a wealth of information on a company, but they do have limitations.
• The statement of cash flow is the equivalent of a for-profit entity's statement of cash flow and is divided into operating, investing, and financing activities.
• The balance sheet provides an overview of a company's assets, liabilities, and shareholders' equity at a specific time and date.
• Cash and cash equivalents are liquid assets, which may include Treasury bills and certificates of deposit.
• Accounts receivable are the amount of money owed to the company by its customers for the sale of its products and services.