The financial statements of a company are prepared and presented according to financial regulations and are designed to give shareholders and investors an idea of the financial position and performance of the company during a period of time.
The financial statements consist of:
• The Balance Sheet – the financial position of the business at the end of a particular period;
• The Profit and Loss Account – calculation of the profit of the business during a particular period;
• The Cash Flow Statement – movements of cash in and out of the business during a particular period.
Though essentially backward-looking in nature, financial statements are also used by the market to assess and predict future performance. Though a company’s financial statements focus on information that can be quantified in monetary terms, in recent times, companies have begun to include more non-monetary information so as to give a more rounded view of the company’s activities. Such information can include, inter alia, environmental disclosures, charitable and political donations, employee health, safety and training, and research and development. This information can be included in the notes and/or the director’s report that accompanies the financial statements.