In business, financial statements are reports that detail a company’s balance sheet, profit, and loss statements, and cash-flow statements. These three documents give investors an understanding of how a company is doing financially on both an annual and monthly basis.
They provide investors with a good idea of the performance of a company’s business, enabling them to determine if a company is in overall financial health. This knowledge can be determined by analyzing the figures contained in financial statements.
However, investors must be wary of the numbers contained within financial statements. They can be confusing, leading investors to make potentially dangerous decisions.