Financial Statement Analysis

Financial statements are formal records of the financial activities of a business. For a corporation with publicly traded securities, there are three primary financial statements that must be reported quarterly (4 times per year)

Income Statement: Reports a snapshot of a company’s business performance over a period of time. This statement indicates how much revenue (sales) is generated by a business, and also accounts for direct product costs, general expenses, Interest on Debt, Taxes, and other expense items. The purpose of this statement is to show the company’s level of profitability, which is equal to a company’s Revenue net of its expenses.

Balance Sheet Statement: Reports a snapshot of a company’s outstanding balances in various accounts at a specific point in time. The purpose of this statement is to demonstrate a business’s financial heath at any given time, by enumerating it assets as well as the claims against them (liabilities and equity).

Statement of Cash Flows: Reports on all of the company’s activities that affect its cash position over a period of time. These activities are broken down into three primary categories: Operating, Investing, and Financing. The purpose of this statement is to give a detailed reconciliation of how the company’s Cash is being used (and how much Cash is being generated).