What is Financial statements?

Financial statements are formal records that provide an overview of a company’s financial performance, position, and cash flows over a specific period. In Switzerland, financial statements are prepared in accordance with the Swiss Code of Obligations (CO) or, for larger companies, international standards such as IFRS or Swiss GAAP FER. They are essential tools for decision-making, regulatory compliance, and financial transparency.

Key Components of Financial Statements

  1. Balance Sheet
    • Presents the company’s financial position by listing its assets, liabilities, and equity at a specific point in time.
    • Assets: Resources owned by the company (e.g., cash, inventory, property).
    • Liabilities: Obligations owed to creditors (e.g., loans, accounts payable).
    • Equity: The residual interest in assets after deducting liabilities.
  2. Income Statement (Profit and Loss Account)
    • Summarizes revenues and expenses to show the company’s profitability during a reporting period.
    • Highlights gross profit, operating profit, and net income or loss.
  3. Cash Flow Statement
    • Tracks cash inflows and outflows from operating, investing, and financing activities.
    • Provides insights into liquidity and the company’s ability to generate cash.
  4. Notes to the Financial Statements
    • Provide additional information on accounting policies, detailed figures, and contingent liabilities to ensure clarity and transparency.

Importance of Financial Statements

  • Decision-Making: Helps management, investors, and stakeholders evaluate financial health and operational efficiency.
  • Compliance: Ensures adherence to Swiss regulatory requirements and tax obligations.
  • Transparency: Builds trust with investors, creditors, and partners by providing a clear financial picture.

In Switzerland’s structured business environment, financial statements are a cornerstone of sound management and legal compliance, enabling businesses to demonstrate their stability and growth potential.