Company Financial Statements - Learn How to Read Financial Statements
The primary aim of this form of analysis is determine the financial health of a company - how much its making now and what it is expected to make in the future. Public companies are required to report earnings on a quarterly basis and various analysts who follow the company stock give estimates ahead of the official earnings report. As long as company is meeting or exceeding the expectations of analysts the stock appreciates in value.
The financial statements that are considered while gauging the earnings of a company are the balance sheet, income statement and statement of cash flows.
Balance sheet-
The balance sheet as the name suggests shows the 'balance' between the assets, liabilities and equity of a company. The assets side of the statement contains the cash, real estate / property and equipment. On the other side we have the debt as well as retained earnings and stock.
Income statement-
The phrase 'bottom line' originates from this financial statement. The main components are revenue, net income and earnings per share. The first line is the income generated by the sales, followed by the expenses. The bottom line is the net profit (or loss) and the income per share.
Statement of cash flows-
This financial statement shows the company's performance over a fixed period of time similar to the income statement. As the name suggests, this statement shows the incoming and outgoing cash flows from investment, sales and financing. It shows how the company functions on a daily basis, how the creditors are valued and where it gets capital for further growth.