1. Balance Sheet:

   • Purpose:
     • Reflects the financial position of a company at a specific point in time (usually the end of an accounting period).
     • Shows how well management is utilizing the company’s resources.
   • Components:
     • Assets: Represent what the company owns (e.g., cash, inventory, property).
     • Liabilities: Indicate what the company owes (e.g., loans, accounts payable).
     • Shareholders’ Equity: Represents the residual interest in the company after deducting liabilities from assets.
   • Equation: Total Assets = Total Liabilities + Shareholders’ Equity.
   • Example: Apple Inc.’s balance sheet includes current assets (cash, receivables, inventory), long-term assets (investments, property), and current liabilities (accounts payable) ¹
     

2. Income Statement (Profit and Loss Statement):

   • Purpose:
     • Shows a company’s financial performance over a specific period (e.g., a month, quarter, or year).
     • Focuses on revenue, costs, and expenses.
   • Components:
     • Revenue (Sales): Income generated from selling goods or services.
     • Cost of Goods Sold (COGS): Direct costs related to producing goods or services.
     • Gross Profit: Revenue minus COGS.
     • Operating Expenses: Include selling, administrative, and other costs.
     • Net Income (Profit): Final result after deducting all expenses from revenue.
   • Example: J.C. Penney’s income statement shows revenue, cost of goods sold, operating expenses, and net income for a specific period ².
3. Cash Flow Statement:
   • • Purpose:
       • Shows a company’s cash inflows and outflows during a specific period (e.g., a month, quarter, or year).
       • Focuses on changes in cash position.
     • Components:
       • Operating Activities: Cash flows from day-to-day business operations (e.g., sales, expenses).
       • Investing Activities: Cash flows related to investments (e.g., buying/selling assets).
       • Financing Activities: Cash flows from financing sources (e.g., issuing stock, repaying loans).
     • Example: J.C. Penney’s cash flow statement details cash received from customers, payments to suppliers, and financing activities ¹

Summary:

• Balance Sheet: Snapshot of a company’s financial position (assets, liabilities, equity) at a point in time.
• Income Statement: Summary of revenue, expenses, and profit over a specific period.
• Cash Flow Statement: Summary of cash inflows and outflows over a specific period.