financial statements

What are Financial Statements?

Financial statements are a collection of summary-level reports about an business’s financial results, financial position and cash flows which include the income statement, balance sheet, and statement of cash flows.

Advantages of Financial Statements

Financial Statements are useful for the following reasons:

To establish the ability of a business to generate cash, and the sources and uses of that cash.
To establish whether a business has the capability to pay back its debts and stay solvent.
To track results on a trend line to spot any potential profitability spikes.
To establish from the financial statements that can indicate the condition of the business.
To investigate the specific details of business transactions as outlined in any disclosures that attach to the statements.
To use as the basis for an annual report which is distributed to a company’s directors and or investors.

Disadvantages of Financial Statements

There are few downsides to issuing financial statements. A sober concern is that they can be fraudulently manipulated, leading directors and or investors to believe that the in house accountants/bookkeepers has produced better results than was really the case. Such manipulation can also lead a bank to issue debt to a business that cannot realistically repay it. Another concern is that financial statements are entirely historical in nature, and so can be misleading when used to project the future results of a business.

Speaking with our team will help you understand the need for regular updates on how your business is going. Remember…….your future is our focus