Statement of Financial Position Definition

The statement of financial position is an alternative term used for a financial statement. A statement of financial position is a summary of the financial stability and profitability of a business organization.

Four Main Parts

The statement of financial position is a snapshot of the success or failure of current operations, managers and general financial health. The health of a business in measured in four main parts: the balance sheet, income statement, statement of shareholder equity and statement of cash flows.

The Balance Sheet

A balance sheet is a summary of an organization's financial stability for a particular point in time. Balance sheets are often reported every quarter and every year to keep stockholders and owners updated on the financial health of the organization.

The Income Statement

The statement of financial position also includes an income statement to measure if the business is profitable. The income statement accounts for revenue, expenses, and net profits or losses for owners and stockholders.

Statement of Stockholder Equity

The statement of stockholder equity may include several years of data to show changes in stockholder equity and in the retained earnings account.

Statement of Cash Flows

A statement of cash flows is also included in the statement of financial position to summarize all the money made and spent by the business.

References

• Business Dictionary: Balance Sheet
• U.S. Securities and Exchange Commission: Beginners' Guide to Financial Statements
• "Understanding Financial Statements;" Lynn Fraser, Ph.D.; 2004