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Financial Statement Analysis

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.  

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Units 1/14