What is a financial statement and why is it important?

A financial statement is a formal record of the financial activities and position of a business, individual, or other entity. The most common types of financial statements include the income statement, balance sheet, and cash flow statement. These statements provide a snapshot of a company’s financial health, showing how much money it is making or losing, what it owns and owes, and its cash flow. Financial statements are crucial for investors, creditors, and management, as they provide the necessary information to assess the company’s performance, make investment decisions, and ensure compliance with regulatory requirements.