Question

A firm's financial statements can tell you a lot about them, but exactly what does that mean and how can financial managers use this data to make informed decisions? Which statements do you feel reveal the most useful information and why?

Answer 1

A firm's financial statements can tell a lot about a firm such as the firm's current financial "position" which is reflected in Balance sheet of the firm; it give a clear picture about firm's "expenses and revenues" reflected in the Income statement of the firm; it also gives a true picture about how much cash is actually going out of business and how much is coming in business which is reflected in the Cash flow statement.

All the above three stated statements are important in financial analysis i.e.

1. Balance sheet

2. Income statement

3. Cash Flow Statement