Here is 3 main financial statements necessary to analysis and improve on finance viability:
No.1. Income Statement - 'A financial statement (also known as profit and loss account) that measures and reports the profit (or loss) the business has generated during a period.'
No. 2. The cash flow statement - 'A statement that shows the sources and uses of cash for a period'
No. 3. Balance sheet - 'A statement of financial position that shows the assets of a business and the claims on those assets'
By analysing these three financial statements on a regular basis a business can proactively forecast problems or opportunities before they arise. The 3 main financial statements are also considered as financial controls as these statements are used to understand and interpret the financial conditions of a business as a means of management and control. The statements enable a business to set guidelines and policies that enable growth and business success. An annual Profit and Loss statement is considered the most important financial statement and UK businesses are legally required to lodge a Profit & Loss Account with Companies House. In regards to cash flow, cash inflows are payments for products or services and interest on savings and investments. Cash outflows are a combination of many things including purchasing stock, daily operating expenses, fixed assets and government taxes. A business is also required to produce a balance sheet annually for reporting purposes. It provides a report of assets or liabilities.
