Financial reports are also required for taxes and accounting purposes.įinancial reports provide you with the critical information you need to track KPIs. CFOs can use this information to calculate the breakeven point, cash collections, and even debt financing. Retained earnings beginning period balance + current period net profit (– current period net loss) – cash dividends – stock dividends = retained earningsįinancial reporting makes it easy to understand how your company is performing financially. The formula for a statement of retained earnings is as follows: This statement is used by analysts to determine how a business’s profits are utilized. It can also be known as a statement of owner’s equity, a statement of shareholders’ equity, or an equity statement. The statement of retained earnings outlines the changes in retained earnings for a company over a specified period. Financing activities: Debt repayments, stock repurchases, and payable dividends.Secondary investments: Office space, fixed-asset purchases, property.Primary investments: Use of investment earnings, issued loans, and asset sales.Operational activities: Accounts receivable and payable, wages, and income tax.The cash flow statement formula adds the beginning cash balance with net changes in each activity to determine the ending cash balance.īeginning balance in cash + net changes in operating, investing, and financing activities = ending cash balanceĬash flow statements typically contain the following information: Cash flows are separated into operating, investing, and financing activities. The cash flow statement, or statement of cash flows, shows the company’s cash inflows and outflows for a period of time. Nonoperating revenue from accrued interest and royalty payments.Secondary expenses such as debt interest and capital loss.Primary expenses, including cost of goods sold and general administrative costs.
Income statements can be tracked quarterly or annually. The income statement formula subtracts expenses from revenue to determine net income. Income statementĪn income statement, also known as a profit and loss statement, shows your company’s revenues and expenses for an accounting period.
Equity-also known as owner’s equity, shareholder equity, or stockholder’s equity-is the difference between the assets and liabilities. Liabilities are the amounts your company owes to other parties. The balance sheet formula subtracts your company’s assets from its liabilities to determine equity.Īssets are resources your company uses to generate revenue and profits. Balance sheetĪ balance sheet shows your company’s assets, liabilities, and equity as of a specific date. Understanding financial statements is the framework for understanding your company’s financial health. Four common financial reports follow standard accounting practices to give you and your stakeholders an accurate picture of your company’s finances.
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