CFA | Level 1 | Lecture 4. Understanding Balance Sheet
Channel: LetsLearn Global
Date: 10/10/2022

Corporate Financial Statements:
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Financial Statement are  a snapshot of your business performance—helping you run your company, plan its future, seek financing and much more. Financial statements are a key tool for running your business. They're a snapshot of your company's finances and give crucial information about your business performance.


Financial statements include:

a statement of financial position (i.e. a balance sheet),
a statement of comprehensive income (i.e. a single statement of comprehensive income or an income statement and a statement of comprehensive income),
a statement of changes in equity, and
a statement of cash flows.

The balance sheet gives information about the company’s financial position at a given point in time, for example at year end.

The statement of comprehensive income provides information about the company’s profits over a period of time.

The statement of cash flows allows us to see whether the profits from the statement of comprehensive income are supported by cash inflows. Sometimes, the company may show profits despite having problems with collecting money from its counterparties.

The statement of changes in equity provides additional information regarding the changes in the company’s financial position.

You should also know that any notes and footnotes provided in a financial report constitute an essential part of financial statements and are the source of important and detailed information left out from the core statements for the sake of clarity.

Balance sheet shows the current financial situation of the company. In other words, it shows the company’s assets and sources of financing assets, namely liabilities and owner's equity.

According to the IFRS framework, an asset is defined as a resource controlled by the company as a result of past events and which is expected to bring future economic benefits to the company.

Examples of assets:

property, plant and equipment (PP&E),
investment properties,
intangible assets,
financial assets,
inventories,
accounts receivable,
cash and cash equivalents, etc.


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