Which of the following best describes financial statements?

Financial statements serve a critical role in conveying the overall financial health of a business. They summarize key aspects of a company's financial performance and position, presenting an integrated view of its income, expenses, assets, liabilities, and equity. These summaries allow stakeholders—such as management, investors, and creditors—to assess profitability, liquidity, and solvency, which are crucial for making informed economic decisions.

Financial statements typically include the balance sheet, income statement, and cash flow statement. Together, these documents present a comprehensive overview of a company's financial circumstances, offering insights into operational efficiency and financial stability. This understanding is essential for effective management, investment analysis, and regulatory compliance.

In contrast, while financial statements include cash flow information, they do not focus exclusively on cash flow. They also encompass liabilities and equity, making the first two options incomplete. Furthermore, financial statements are highly relevant to publicly held companies due to their obligation to disclose accurate financial information to stakeholders and regulators, thus reinforcing the significance of maintaining transparency and accountability.