3. Financial Statements

To be useful, information must be understandable. Having that in mind it is fair to say that the financial statements are the main output of the accounting procedures. Each report has it own purpose, interpretation and presentation guidelines. The most common financial statements disclosed are:

This manual focus more on the income statement and on the balance sheet than on the Cash Flow statement and the statement of changes in equity.

Also, do not mistake the cash flow statement which is an accounting financial report with the calculation of free cash flows, a financial concept which is presented financial analysis manua. The first is meant to present all the changes in cash flows of a given company. The later reflects the cash flows that the company makes available or requires from its capital holders.

Before advancing further keep this rule of thumb: you should always keep in mind that, although there may be an understanding of the values that an indicator should have, any interpretation is reliant on its comparability, meaning that companies should be compared to those with the same type of business or industry or that share a specific feature in common with your company or project.