Introduction to Financial Statements
What are Financial Statements?
Financial statements are the medium by which a company discloses information concerning its financial performance. A financial statement of any company is its report card which shows how a company has fared in the last quarter / year and it is the most important aspect of fundamental analysis. It quantifies the company’s performance, strength, liquidity & profitability.
The numbers in a company's financial statements can be bewildering and confusing to many investors. However, if we know how to accurately analyse & interpret them, the financial statements are an ocean of information.
If you can develop a grasp of the definition of the balance sheet and the structure of an income statement, it would help you identify the "red flags" and "gold nuggets" of a company.
Three most important financial statements are:
- Income Statement
- Balance Sheet
- Cash Flow Statement
We will learn to analyze all three financial statements in our upcoming sections of this module, starting with the income statement in the next one.