The income statement is a financial report which provides an overview of the company’s performance over a given period. It typically consists of revenues, expenses, gains and losses that occurred during that timeframe (Ormiston & Friedlan). The primary purpose of this statement is to inform investors about the company’s sales figures as well as its total profit or loss at any point in time. This gives them insight into how successful a business has been operating and whether or not it is meeting its goals.

The balance sheet is another key component of financial statements and acts as a snapshot of the company’s assets, liabilities and shareholders equity at any one point in time (Ormiston & Friedlan). This document helps to identify what resources are available for use while also making it easier to calculate the net worth of the organization by subtracting all liabilities from all assets. The information provided here allows investors to assess how much value their money would be getting should they decide to invest in this particular firm.

Finally, there is the statement of cash flows which documents all cash inflows and outflows over a certain period (Ormiston & Friedlan). This includes items such as investments made by individuals or institutions along with information on dividends paid out if applicable. Furthermore, it also contains details regarding purchasing inventory materials from suppliers; selling merchandise; paying salaries; etc., essentially providing an accurate picture of where money was coming from and going during that specific period. All three criteria combined give potential investors everything they need to know about how profitable an organization may be now or in future so it can be seen why these reports are so important for any business wishing to secure capital.