Ace the AFP Exam 2025 – Boost Your Financial Wizardry!

The three main types of financial statements are the income statement, balance sheet, and cash flow statement.

The income statement provides a summary of a company's revenues and expenses over a specific period, reflecting its profitability. It shows how much money the company made (or lost) during that time, which is essential for assessing performance.

The balance sheet presents a snapshot of a company's assets, liabilities, and equity at a particular moment in time. This statement is crucial because it shows the financial position of the firm and how resources are funded, whether through debt or equity investment.

The cash flow statement details the actual inflows and outflows of cash within a business, categorized into operating, investing, and financing activities. This document is important for understanding a company’s liquidity and cash management capabilities, which helps stakeholders determine whether the business can meet its short-term obligations and fund operations.

Other options include statements like the audit report, retained earnings statement, and budget report, which, while important, do not fit into the primary category of the three main financial statements as recognized universally in financial reporting. The correct identification of these three core statements is foundational knowledge in finance and accounting, necessary for analyzing a company's financial health.