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Introduction and advantages of Financial Satements

Introduction
       In simple words the financial statements contain summarized information of the firm's financial affairs, organization systematically. It means to present the firm's financial situation to uses. Financial information is needed to predict, compare and evaluate the firm's earning ability and in decision making. The financial information is contained in the financial statement or reports. A financial statement is a collection of data organized according to logical and consistent accounting procedures. Hence, the basic purpose behind financial statement is to convey an understanding of some financial aspects of a business firm. The balance sheet and profit and loss account are the important financial statements used in business. The balance sheet gives a summary of the firm's assets and liabilities and owner's equity. The profit and loss account reflects the results of the business operating during a fixed period of time.
Advantages
      Financial reports and statements are essential fro creditors, investors and shareholders. They are important for government, researcher and other competitive firm and company because the real information and facts are formulated only through the financial statement and report
Financial statements have two major uses in financial analysis;
Historical records : When the large number of financial statements are compiled over a number of years a financial analyst can determine those financial factors that have influenced the growth and current status of firm.
A course of action: The financial statements are used to forecast a course of action for the firm. A proforma financial statement is prepared for a future period.

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