Although individual financial statements each provide different snapshots of financial health, all financial reports reflect business activities that produce a company's profit or loss. The balance sheet shows how cash flow changes revenue and expenditure accounts, while the income state shows true net income at a given point in time. Investors use the various reports as tools that inform investing decisions. And, banks consider basic financial statements powerful tools useful for evaluating creditworthiness and profit potential. There are four basic financial statements everyone in business should know how to read and interpret: the income statement, the balance sheet, the cash flow statement, and the retained earnings statement.
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