Financial statements are an essential tool for tracking and understanding a business’s financial performance. They provide a comprehensive overview of the company’s financial activities and enable the comparison of its performance against other businesses in the same sector. A financial statement typically includes the balance sheet, income statement, cash flow statement, and statement of changes in equity. Together these provide insights into assets, liabilities, revenues, expenses, profits, and losses of the business. By studying financial statements, stakeholders can gain a better understanding of a business’s strengths, weaknesses, opportunities, and risks—all critical information to make informed decisions about investments.