Why Shareholders Need Financial Statements
Your company’s financial statements are like a snapshot of how well the business is doing and where its financial health is leading at any particular time. They provide insight into the company’s profitability, liquidity position, cash inflows and outflows, and equity investments. This type of information is essential for potential investors, lenders, and shareholders alike. It helps them make critical corporate decisions.
However, different types of financial statements provide different information.
By taking a detailed look at the company’s financial statements, a shareholder can determine the number of assets that the company owns compared to the total liabilities that it owes. Comparing the two figures tells them about your company’s liability position.
A balance sheet is also crucial because it mentions the total value of shareholder’s equity at any given time. Shareholders can use this information and the total number of outstanding shares (also learned from financial statements) to calculate their share in the company or the company’s total earnings per share.
The income statement
A shareholder helps you raise capital for the business by investing in it. In return, the company promises them a particular share of the total income, known as the dividend. The dividend is always calculated from the net income; shareholders need to know how much the company is making. This also helps them decide whether they would want to buy the shares at all.
The income statement gives you a detailed view of the company’s total sales, operating and non-operating expenses, interest and tax expenses, cost of goods sold, and net income. A company with a higher net income is said to have a good market reputation and stock market value.
Cash flow statement
A company with a healthy and positive cash inflow stands higher chances of paying its shareholders and creditors on time since dividends are usually paid in cash. The cash flow statement tells a shareholder how much funds the company has in order to meet any short and long-term obligations. If the company’s total net cash flow is negative, a shareholder might want to sell the shares or withdraw the investment.
Faber LLP is offering accurate, up-to-date, and regulatory compliant accounting services in Edmonton. Our services also include bookkeeping and financial statement audits. We will make sure your company’s financial statements are timely updated and readily available for your shareholders. Get in touch to get started!