Financial Statements: List of Types and How to Read Them

Meaning Profit After TaxProfit After Tax is the revenue left after deducting the business expenses and tax liabilities. This profit is reflected in the Profit & Loss statement of the business. The RevenuesRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions. To use as the basis for an annual report, which is distributed to a company’s investors and the investment community.

• A financial statement is meant to give an idea of a company’s financial condition, including revenues, expenses, assets and liabilities, cash flow, and more.
• This is because under the accrual method, a company’s income statement might include revenue that the company has earned but not yet received, and expenses the company has incurred but not yet paid.
• GAAP is a set of guidelines and standards U.S.-based companies must follow when preparing their financial statements.
• Earnings Before Interest And TaxesEarnings before interest and tax refers to the company’s operating profit that is acquired after deducting all the expenses except the interest and tax expenses from the revenue.
• They should be used in conjunction with other financial information to get a complete picture of a company’s financial situation.

Most income statements include a calculation of earnings per share or EPS. This calculation tells you how much money shareholders would receive for each share of stock they own if the company distributed all of its net income for the period. At the top of the income statement is the total amount of money brought in from sales of products or services. It’s called “gross” because expenses have not been deducted from it yet. Ratio AnalysisRatio analysis is the quantitative interpretation of the company’s financial performance.

Investing Activities

Whether this challenge is posed to a sophisticated investor or to a new business student, the listing almost always includes the same basic components. Say your popsicle cart blows a tire every other month, and you have to pay $50 in maintenance expenses each time. To increase your company’s cash flow from operating activities, you need to speed up your accounts receivable collection. That could mean telling customers you’ll only accept cash rather than I.O.U.s, or requiring your customers to pay outstanding invoices within 15 days rather than 30 days. On our balance sheet example above, the only liability is a bank loan. But total liabilities can also include credit card debt, mortgages, and accrued expenses such as utilities, taxes, or wages owed to employees.

Non-operating items are all the other revenues and expenses that are not part of the business’s main operations. These include interest expenses, interest income, proceeds from sale of extraordinary items, lawsuit expenses, and taxes. From the balance sheet above, we can see that as of September 2021, Apple, Inc.’s total assets amount to $351,002,000. Its total liabilities are $287,912,000, https://kelleysbookkeeping.com/ and total shareholders’ equity is $63,090,000, which, when lumped together, will equal the total assets of $351,002,000. Finally, it is important to note that the income statement, statement of retained earnings, and balance sheet articulate. The income for the period ties into the statement of retained earnings, and the ending retained earnings ties into the balance sheet.

How To Interpret Financial Statements

Long-term DebtLong-term debt is the debt taken by the company that gets due or is payable after one year on the date of the balance sheet. It is recorded on the liabilities side of the company’s balance sheet as the non-current liability. Financial Statements provide a representation of a company’s financial performance over time. For example, some investors might want stock repurchases while other investors might prefer to see that money invested in long-term assets.

• Investors and financial analysts rely on financial data to analyze the performance of a company and make predictions about the future direction of the company’s stock price.
• It does not show the flows into and out of the accounts during the period.
• In simple terms, retained earnings are the amount the company keeps after paying the dividend from net income.
• They rejected the market prices on the questionable grounds that the market was too illiquid to provide a “fair” valuation.

Let’s look at each of the first three financial statements in more detail. Unrealized Gains/lossesUnrealized Gains or Losses refer to the increase or decrease respectively in the paper value of the company’s different assets, even when these assets are not yet sold. Once the assets are sold, the company realizes the gains Financial Statements – what are they or losses resulting from such disposal. Additional Paid In CapitalAdditional paid-in capital or capital surplus is the company’s excess amount received over and above the par value of shares from the investors during an IPO. It is the profit a company gets when it issues the stock for the first time in the open market.