The three financial statements

The income statement, the balance sheet and the cash flow statement, and what each one shows.

Click any Tap any word with a dotted underline to see what it means.

Every public company publishes three main financial statements in its annual report. Each one answers a different question, and together they give a fuller picture than any of them alone.

Income statement: did the company make a profit?

It starts with revenue, the money from sales, and subtracts costs step by step: the cost of making the products, the cost of running the business, interest and taxes. Along the way it shows operating income, and at the bottom, net income. It covers a period, usually a year or a quarter.

Balance sheet: what does it own and owe?

It is a snapshot of a single day, usually the last day of the fiscal year. On one side are the assets, such as cash, buildings and inventory. On the other are the liabilities, such as debt, and shareholders' equity, the part that belongs to the owners. The two sides always balance: assets equal liabilities plus equity.

Cash flow statement: where did the money go?

Profit and cash are not the same, because some sales haven't been paid for yet and some costs don't involve cash. This statement follows the actual money: operating cash flow from the business, cash spent on investments such as capital expenditures, and cash received from or paid to lenders and shareholders, including dividends and buybacks.