Capital Markets: Financial Reports All companies whose securities are traded on capital markets are required to publish financial statements. Clients are informed and presented with relevant and reliable accounting information in a standardized form and content that is recognizable and intelligible for all categories of potential investor. This means primarily the following financial statements: The Balance Sheet The Income Statement The Cash Flow Statement The goal of financial statement analysis is to gather information on an enterprise's financial position and business performance to aid decisions on investing/buying its securities. The most important indicator is an enterprise's capacity to generate future cash flows. Investors can assess a company more easily, if they have access to data on its financial position, its business success and profitability, and changes in cash flows. The most important qualitative characteristics of the accounting information published in these financial statements are: Intelligibility, which implies suitability for communicating. Investors must be able to interpret the information and use it for decision making. Relevance, which implies that the information is important for decision making. In other words, if the relevant information did not exist, a different decision would probably be made. Relevant information must include data on past costs and events and must be helpful in forecasting future conditions. Reliability, which means that an investor must be sure he can rely on the information. It must be truthful and verifiable independently or by auditors. Comparability, which is the principle whereby financial statements must be comparable, so that investors can assess trends related to business successes and financial position. Investors must be allowed to compare financial statements by different enterprises, both in country and abroad, to be able to assess the relevant business success, financial position and changes in cash flow. The Balance Sheet is a systematic overview of assets, liabilities, and capital at a given point in time. It is typically prepared at the end of the business year, which does not necessarily match the calendar year, as well as semiannually. The Balance Sheet structure is standardized and regulated by law in every country. Legal regulations in this area are mainly harmonized with ISA (International Accounting Standards). The balance sheet is one of the most significant financial statements, as it includes fundamental information on an enterprise's financial position. It has added significance because all the basic indicators of performance and success are calculated on the basis of data from this financial statement and the income statement. The Income Statement is a financial statement that presents information on a company's financial performance for a given period of time, by categories: revenue, spending and net gain (net loss). How these data are presented is regulated by the IAS and the national accounting standards. In line with these standards, gross profit is the difference between revenues from sales and sales expenditures, increased or decreased by adjustment in the value of stock. Profit from activities is obtained by deducting distribution and administration costs from gross gain. When revenues from branches, associated legal entities, other investments, financing, etc. are added and capital spending and other expenditures deducted, one gets the before tax profit or loss, which serves as the basis for calculating and paying tax. After profit tax, net profit is obtained as the final indicator of a company's profit and its business success for the given period of time. The Cash Flow Statement emphasizes changes due to factors causing an increase or decrease in cash over a given period of time. Changes occur when money is collected (inflow) or paid out (outflow). The statement shows only the transactions that result from cash inflow or outflow.
