A financial statement is a means for companies to disclose to their stakeholders information about financial performance. Although looking into the complicated numbers can sometimes be overwhelming, experienced analysts can get very valuable information that will help them determine future performance of the company from their financial statements. Here are some of the fundamental financial statements being looked into.
The balance sheet provides information regarding a company’s assets, liabilities as well as equity at a certain period of time. Total assets can refer to a company’s liabilities together with the equity put into the company by shareholders. The liabilities includes the debt incurred by the company which the of course need to pay back. It can be considered as part of the asset since it represents additional capital used to operate the company business.
While the balance sheet can provide information regarding the overall status of the company, the income statement differs in terms of what info it can provide. The data in the income statement provide details of the company’s performance at a specific period of time. The income statement provides information of the company’s income in terms of revenues, expenses, as well as the profit generated during a certain period.
Cash Flow Statement
The statement of cash flows provides a record of the company’s cash inflows and outflows for a certain point in time. While there are many reasons companies use their cash, it can be quite difficult for them to manipulate information as to how they use it. While some accountants may be able to manipulate earnings reports, it is very difficult to fake having cash in the bank. Many experience investors and traders usually make use of statement of cash flows to come up with a conservative means to gauge a company’s performance.