Market Live brings in the Stock Market Tutorial which explains the basics of Fundamental Analysis. Whether it is about Reading Balance Sheets or about understanding the Cash Flow – Get all the fundamental analysis aspects being explained in a simple manner here.
- Financial Accounting
- What are Financial Statements ?
- What are the different Financial statements prepared ?
- When are the financial statements prepared ?
Every organization or company running a business needs accounting for its operations. Accounting is thus called the language of business, as it acts as the medium for reporting financial information about a company to many different groups of people.Financial accounting thus often includes providing information to groups including
- The present and potential stakeholders of the company,
- Creditors to the company such as the banks and money lenders,
- The Company’s Board of Directors, in their role as appointees of shareholders, monitoring the management’s actions.
- Financial analysts who closely track the financial health of the company,
- Economists and government regulatory agencies which use this information for a wide variety of financial statistics and also ponder over it to police the capital market system in general.
To report the outcomes of the financial accounting, the company produces Financial Statements, which will be made available to all the above mentioned interested user groups. Financial Statements are a means of showing how a business, or any organization or individual is progressing in a manner which should help comparison of operation over the years and comparison with other enterprises.
Generally most of the companies will prepare and publish the following three important financial statements :
- The Balance Sheet
- The Income Statement and
- The Cash Flow Statement
Of course, there are other numerous detailed financial statements prepared by the accounting personnel. But of all these, the three statements mentioned above are generally of interest to most of the investors and prospective share holders of the company.
The Balance Sheet captures the assets and liabilities of the company. The Balance sheet is like a snapshot of the assets and liabilities existing at balance date.
The Income statement is a summary of all the revenues generated and expenses incurred during the period of the statement.
The Cash Flow statement shows the Cash coming in and the cash going out – that is the cash receipts and cash payments.
Financial statements are prepared at the end of a period in the financial calendar – typically quarterly or annually in practice. These statements update listings of financing and investing activities, and also summarize the operating activities for the most recent period(s).