Financial statements are a key source of information about a company's financial health. The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. Here's a breakdown of each:

1. Balance Sheet: This statement provides a snapshot of a company's financial position at a particular point in time. The key components are:

• • Assets: These are resources owned by the company that can be measured in monetary terms and are expected to provide future economic benefits.
  • Liabilities: These are the company's financial obligations or debts.
  • Equity: Also known as net assets or shareholders' equity, it represents the residual interest in the assets of the entity after deducting liabilities.

1. Income Statement: Also known as the Profit and Loss statement, it reports the company's revenues, costs, and expenses over a period of time. The key components are:

• • Revenue: This represents the income earned from the company's main operations.
  • Cost of Goods Sold (COGS): These are the direct costs of producing the goods sold by the company.
  • Operating Expenses: These are the costs associated with running the business that are not directly tied to the production of goods or services.
  • Net Income: This is the company's total earnings, calculated as Revenue - Expenses.

1. Cash Flow Statement: This statement shows how changes in the balance sheet and income statement affect cash and cash equivalents. It breaks the analysis down to operating, investing, and financing activities.

• • Operating Activities: This section reports the cash effects of transactions that create revenues and expenses, thus affecting net income.
  • Investing Activities: This section shows cash flow from the purchase and sale of assets, such as real estate and equipment.
  • Financing Activities: This section shows cash flow from issuing stocks and bonds, paying dividends, and servicing debt.

These three financial statements interrelate in the following ways:

• The bottom line of the income statement, 'Net Income', is a key component of both the cash flow statement (starting point for the cash flows from operating activities) and the balance sheet (where it is added to retained earnings in the equity section).
• The cash from the financing and investing sections of the cash flow statement affect the asset and liability sections of the balance sheet.
• Many items in the income and cash flow statements correspond to items in the balance sheet. For instance, depreciation expense on the income statement relates to property, plant and equipment on the balance sheet, and affects the accumulated depreciation account on the cash flow statement.

By looking at all three statements together, one can get a comprehensive view of a company's financial health.