The corporate financial statements are the financial reports or formal record of the financial and business activities of a firm. The corporate financial statements actually give a summary of the financial condition and profitability of the firm in both long and short term.
The corporate financial statements are generally complex in nature as they contain analysis and discussion on the management decisions and financial statement notes. The financial statement notes define each and every item in the balance sheet besides describing cash flow statement and income statement in details.
The four basic types of corporate financial statements are:
- Income statement
- Balance sheet
- Statement of cash flows
- Statement of retained earnings
The income statements are also called as the profit loss statements. This statement gives information on the result of various operations of the company over a term period.
The balance sheet is also known as the statement of financial condition or position. It gives information on the net equity, assets and liabilities of a company at a given point of time.
The statement of cash flow gives information on the cash flow activities of a company. This statement specially covers the fields of investment, operation and financing activities of the company. The statement of retained earnings describes the changes that occur in the retained earnings of a company.
The prime objective of corporate financial statements is to give information on the performance, financial strength and financial position changes of a company. This financial statement is valuable for the users while they go for economic decisions. The major criterion of a financial statement is that it should be relevant, comparable, understandable and reliable. The financial position of a company refers to the reported equity, assets and liabilities while the financial performance of a company refers to the reported income and expenditures of the company. The corporate financial statements are understood by those people who have significant knowledge of Economics and business activities.