Balance Sheet + Income Statement

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What Is a Balance Sheet?

A balance sheet is a financial statement that reports a company’s assets, liabilities and shareholders’ equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure. It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

It is used alongside other important financial statements such as the income statement and statement of cash flows in conducting fundamental analysis or calculating financial ratios.

Formula Used for a Balance Sheet

The balance sheet adheres to the following accounting equation, where assets on one side, and liabilities plus shareholders’ equity on the other, balance out:

\text{Assets} = \text{Liabilities} + \text{Shareholders’ Equity}Assets=Liabilities+Shareholders’ Equity

What is an Income Statement?

An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period, with the other two key statements being the balance sheet and the statement of cash flows. Also known as the profit and loss statement or the statement of revenue and expense, the income statement primarily focuses on the company’s revenues and expenses during a particular period.

The income statement focuses on the four key items – revenueexpenses, gains, and losses. It does not cover receipts (money received by the business) or the cash payments/disbursements (money paid by the business). It starts with the details of sales, and then works down to compute the net income and eventually the earnings per share (EPS). Essentially, it gives an account of how the net revenue realized by the company gets transformed into net earnings (profit or loss).

Source: Investopedia

Source: Maximumyield


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