Introduction to Financial Statements

It is important to understand financial statements because they can give us a lot of information on the company and their growth. Every company that is publicly traded needs to release yearly and quarterly statements, known as the 10K and the 10Q respectively.

More broadly understanding financial statements can help us:​

Help investors understand the state and health of an enterprise. Some of the factors we can learn from the statements are the growth rate, earnings per share growth, profitability, how they finance themselves and their liquidity.
Translate their activities into concrete statistics. This means that you can learn to evaluate their past performance and are better equipped to predict their future performance. It can also warn you of potential problems within the firm.

The Company Report

In this section, we will introduce you to the company report and its components. The company report can give you a lot of information on the company and usually includes a company overview and business description, the accounting policies, management discussion and analysis, updates on mergers and acquisitions, risks to the business operations and financial statements.

Each financial statement tells you different things:

Balance Sheet

Provides you with the information of what the company owns, often referred to as assets, and what the company owes, often referred to as liabilities.

Income Statement

Allows you to understand

     (1) how much money the company is making, often referred to as revenue,
     (2) what they spend their money on, often referred to as their expenses, and
     (3) the difference between the first and the second, which is the profit the company makes.

Cash Flow Statement

Explains what the firm has spent their cash on over time.

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