Financial statements and other information: Overview, definition, and example
What are financial statements and other information?
Financial statements and other information refer to the documents and data that provide a comprehensive view of a company’s financial health and performance. Financial statements typically include key reports such as the balance sheet, income statement, and cash flow statement, which offer insights into a company’s assets, liabilities, revenues, expenses, and cash flow. Other information may include supplementary details such as notes to the financial statements, management’s analysis, or any disclosures about significant events or risks that might affect the financial standing of the company.
Together, financial statements and other information are used by investors, analysts, regulators, and other stakeholders to assess the financial position of a company, make informed decisions, and ensure compliance with accounting standards and regulations.
Why are financial statements and other information important?
Financial statements and other information are crucial because they provide transparency into a company’s financial performance, helping stakeholders understand the company’s profitability, solvency, and operational efficiency. These documents allow investors to evaluate whether the company is a good investment, enable creditors to assess the company’s ability to repay debts, and help management make strategic decisions.
For businesses, maintaining accurate and up-to-date financial statements is essential for meeting legal and regulatory requirements, filing taxes, and obtaining financing. It also builds trust with stakeholders, demonstrating the company’s commitment to transparency and good governance.
Understanding financial statements and other information through an example
Imagine a publicly traded company, Company X, preparing its annual report. The report includes financial statements such as the income statement, which shows that the company made $10 million in revenue and had $8 million in expenses, resulting in a net income of $2 million. The balance sheet shows that Company X has $15 million in assets, $5 million in liabilities, and $10 million in equity.
In addition to the financial statements, other information included in the report might explain any significant changes in the company’s operations, such as the opening of a new manufacturing facility, or disclose any legal or environmental risks the company is facing. This other information helps provide context to the financial statements and offers a more complete picture of the company’s situation.
An example of financial statements and other information clause
Here’s how a financial statements and other information clause might appear in a contract:
“The Company agrees to provide the Investor with audited financial statements for the past fiscal year, including the income statement, balance sheet, and cash flow statement, within 30 days of the fiscal year-end. The Company shall also provide any other information necessary to assess the Company’s financial condition, including management’s discussion and analysis, any significant contracts, and any material risk factors.”
Conclusion
Financial statements and other information are essential tools for assessing a company’s financial health and making informed decisions. Financial statements provide key metrics such as income, assets, and liabilities, while other information offers additional context and insights that enhance the understanding of the financial position. Together, they serve as the foundation for transparency, accountability, and informed decision-making in both business operations and investment activities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.