A financial statement can be well defined as a formal record of any business’, individual, or entity’s financial activities. All the important information of a business enterprise is presented in the financial statements as these are easy to understand because of their structured presentation. These statements might, however, get complex for large corporations and might also include a wide-ranging set of notes to financial statements explaining about the financial policies, management discussion, and analysis.
The main aim of financial statements is providing info about the financial position, performance, and variations in the financial position of a business enterprise. The financial statements of any business entity should be relevant, understandable, reliable, and comparable. An understandable financial statement helps business entity’s stakeholders to get reasonable knowledge about the business and its economic activities. As far as financial statements are easy to understand, this helps investors to make investment decisions in the company. The main objectives of financial statements are listed below:
- The financial statements are required by the owners and managers for making imperative business decisions.
- The financial statements are used by prospective investors for assessing the feasibility of investing in a company.
- Financial statements of a business are used by banks and other financial institutions to make decisions about granting loan or extending debt securities, and similar more.
- Financial statements help vendors understand the financial position and creditworthiness of a company to pay off its short term debts.
- Financial statements of a business are also helpful for government to ascertain the accuracy of taxes and similar duties stated and paid by a company.
A business enterprise presenting financial statements in accordance with IFRS in the initial stages is considered as a “first-time adopter” according to IFRS. The first IFRS financial statements of a business are the initial financial statements of an entity wherein the entity adopts IFRSs, by an unreserved and unambiguous statement from those statements of acquiescence with IFRSs. Each interim financial report is required to be presented in accordance with IFRS. The IFRS, however, does not apply to changes occurring in accounting policies created by an entity which already applies IFRSs.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Debt-to-Equity Ratio
- Accounts Payable Turnover Ratio
- Current Ratio
- Financial Leverage
- Return On Capital Employed (ROCE)
- Receivable Turnover Ratio
- Debt Service Coverage Ratio
- Debt Ratio
- Quick Ratio
- Statement of Comprehensive Income
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