Part 2

Exploring Financial Statements

IN THIS PART …

Get to know the ins and outs of the income statement, which summarizes the profit-making activities of the business and its bottom-line profit or loss for the period.

Find out how the balance sheet reports the financial condition of the business at a point in time — especially on the last day of the profit period.

Understand what’s included in the statement of cash flows, which reports the amount of cash generated from profit and other sources of cash during the period and what the business did with this money.

Make sure you’re up to speed on the topic of adequate disclosure in external financial reports to the creditors and investors of a business. Business financial reports should reveal all the information that the creditors and investors are entitled to know.