Expenses

The statements break down various expenses incurred by the business, such as cost of goods sold, operating expenses, interest expenses, and taxes. 

Gross Profit Margin

The gross profit margin is calculated by dividing gross profit (revenue minus cost of goods sold) by revenue. It indicates the profitability of the core operations of the business.

Net Profit Margin

This metric is calculated by dividing net income by revenue and represents the overall profitability of the business after all expenses.

Balance Sheet

The balance sheet provides a snapshot of the business's financial position at a specific point in time. It includes assets (what the business owns), liabilities (what the business owes), and equity (the owner's or shareholders' interest in the business).

Assets

The balance sheet lists the business's assets, including current assets (e.g., cash, accounts receivable) and non-current assets (e.g., property, plant, equipment).

Liabilities

Liabilities on the balance sheet include current liabilities (e.g., accounts payable, short-term loans) and long-term liabilities (e.g., long-term debt).

Equity

Equity represents the residual interest in the assets of the entity after deducting liabilities. It includes owner's equity or shareholders' equity.

Cash Flow Statement

The statement of cash flows shows how cash and cash equivalents have changed over the reporting period. It categorizes cash flows into operating, investing, and financing activities.

Operating Cash Flow

This section of the cash flow statement indicates the cash generated or used by the business's core operating activities. It reflects the ability to generate cash from day-to-day operations.

Investing Cash Flow

Details cash flows related to investments, such as purchasing or selling assets like equipment or investments in other businesses.

Financing Cash Flow

Shows cash flows related to financing activities, such as borrowing or repaying debt, issuing or buying back shares, and paying dividends

Earnings per Share (EPS)

For publicly traded companies, the financial statements often provide EPS, which is the portion of profit attributable to each outstanding share of common stock.

Debt Ratios

Financial statements can be used to calculate various debt ratios, such as debt-to-equity ratio and interest coverage ratio, to assess the company's financial leverage and ability to service its debt.

Inventory Turnover

For businesses with inventory, financial statements can help calculate inventory turnover, indicating how efficiently inventory is managed.

Accounts Receivable Aging

Information on accounts receivable can reveal how quickly customers are paying their bills and the potential for bad debts.

Depreciation and Amortization

Financial statements include information about the depreciation and amortization expenses, which reflects the allocation of costs for long-term assets.

Accruals and Prepayments

These accounts show whether expenses or revenues have been recognized before or after cash transactions.

Comparative Data

Financial statements often include data from previous periods (comparative data) to facilitate trend analysis and performance assessment.

Revenue

Financial statements show the total revenue generated by the business during a specific period. This includes sales, fees, or any other income sources.

Profit or Loss

By subtracting total expenses from revenue, you can determine whether the business made a profit (net income) or incurred a loss (net loss) during the period.