Financial statementsare reports on companies’ spending and fiscal positions. These statements can be audited by the government to prevent tax fraud and other illegal activities. Financial analysts use these statements to analyze a company’s performance, then use that information to make predictions about its stock price and future success.
Financial statements can be divided into four categories: balance sheets, income statements, cash flow statements, and equity statements.
Balance Sheet
Balance Sheets detail a company’s assets, liabilities, and net worth for a specific date. These sheets are typically created at the end of the fiscal year. The assets are listed in order of liquidity, while the liabilities are listed in the order that they need to be paid.
Income Statement
Income statements cover either a year (annual financial statements) or a quarter (quarterly financial statements), and describe how a company arrived at their net income over that period. The details of these statements include revenues, expenses, and earnings per share, and usually includes past data to compare with.
Cash Flow Statement
A cash flow statement describes a company’s inflows and outflows of money over a period of time. These flows of money come from three main activities: operating, investing, and financing. Analysts use cash flow statements to find dividends paid and the dollar value of repurchased shares.
Equity Statement
Equity statements describe how the equity of a company changes over time. This change is affected by net profit or loss, individual gains or losses, shares bought and sold, and dividend payments.
