The Four Primary Financial Statements

Income Statement

Measures revenues and expenses over a set period, answering how much money was earned and how much was spent.

Balance Sheet

Shows the financial position of a business at a specific point in time, answering what the business owns and owes.

Statement of Cash Flows

Tracks cash inflows and outflows from operating, investing, and financing activities, answering how these activities impacted the cash position.

Retained Earnings Statement

Highlights how net income is distributed to shareholders or retained in the business, answering how much money was reinvested versus paid out.

Net Income

Represents the total money flowing in and out during a specified period, found in the Income Statement.

Assets

What the business owns, such as cash and buildings, as indicated in the Balance Sheet.

Liabilities

What the business owes, such as loans and unpaid bills, as indicated in the Balance Sheet.

Stockholders’ Equity

The leftover value after liabilities are subtracted from assets, representing ownership value.

Liquidity

The ease with which cash can be used, a critical factor in the Statement of Cash Flows.

Operating Activities

Cash generated from core business operations, as detailed in the Statement of Cash Flows.

Investing Activities

Cash used for investments, like purchasing equipment, according to the Statement of Cash Flows.

Financing Activities

Cash flows from loans or issuing equity, as reported in the Statement of Cash Flows.

Management Discussion and Analysis (MD&A)

A section of annual reports where management discusses ability to meet obligations, operational results, and future expectations.

Notes to the Financial Statements

Detailed explanations of how values were calculated and key disclosures omitted from primary statements.

Auditor’s Report

An independent examination of financial statements evaluating stability and fair presentation of data.

Unqualified Opinion

Indicates that the auditor trusts the financial statements' information.

Qualified Opinion

Raises concerns about the reliability of financial statements or the company's ability to continue operations.

Core Equation

Assets = Liabilities + Stockholders' Equity, a fundamental principle of the Balance Sheet.