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Companies use the income statement to show how successful the company is during specific time frames. Investors often want to know how much money is being brought in, they want to know that the company has enough funds to pay the operating expenses and any liabilities the company has.
Those same investors oftentimes wish to receive dividends on their shares of stock. They can ascertain whether the company has the means to do this by perusing the retained earnings statement. The retained earnings statement shows how much money the company has paid out, as well as how much the company has kept for future growth. If investors wish to buy a company that is going to be a strong growth company, then retained earnings is important because it will show that the company has the funds to do so.
A company's cash flow is a high priority to bankers,...
They will want to know that the company has the means to repay such loans, and they will want to know how that revenue is being generated and if it is being spent wisely.
Shareholders also wish to know how much their shares are worth or, in other words, the shareholders equity. They can ascertain this fact by looking at the financial statements. The balance sheet shows how much the company is worth, dividing that amount by the number of shares outstanding will provide the investors with a basic look at how much equity they have (per share) in the company.
References
The Book ***
Weinstock, M.; (2008) Where Main Street & Wall Street cross, Hospitals & Health Networks, Vol. 82, No. 6, pg. 41
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