The financial statements are detailed reports that provide potential investors with important information about the financial health and performance of the company before it goes public. They help investors assess the company’s profitability, financial stability and future potential.
The financial statements in an IPO prospectus typically include the following:
- Income statement (profit and loss account): It shows the company's revenues, expenses, and profits over a period of time (usually 3 to 5 years) and helps investors understand the company's profitability and operating efficiency.
- Balance sheet: A snapshot of the company's assets, liabilities and equity at a specific point in time. It helps investors assess the company’s financial position and its ability to meet short-term and long-term obligations.
- Cash flow statement: This shows the cash inflows and outflows from the company’s operating, investing, and financing activities. This helps investors to understand the company’s liquidity and cash management.
- Auditor’s report: An independent assessment that confirms the accuracy and compliance of the financial statements with accounting standards.
