In this article, we introduce three important financial reports:
- A balance sheet
- An income (or profit and loss) statement
- A cash flow statement
In fact, every publicly traded company – a company that allows people to buy stock in it – provides these reports for their shareholders.
For example, go to this link and you can see Apple’s financial reports:
Or if you like to look at a trending stock, go see Facebook’s financials:
(Keep in mind that Facebook’s financials went down in April 2018, due to the security concerns for how Facebook gave access to users’ personal information to outside companies. This will be a good one to see how the financials are affected in both a positive and negative way.)
A balance sheet shows a company's financial state at one specific point in time. For most publicly-traded companies, the balance sheet reporting date is at the end of the organization's fiscal year. Organizations can and do produce balance sheets at various times, however. A balance sheet's main importance is to illustrate the current financial value of an organization.
An income statement, which is also known as a profit and loss statement, reports the financial performance of an organization over a span of time. Many organizations review this report more often than other reports, due to its ability to show trends and current performance against a previous time frame.
Cash Flow Statement
A cash flow statement accompanies the income statement. It shows the impact that the organization's activities on the organization's cash flow.
As you look at a company’s financial reports, make it a habit to see trends. Trends are where you see if certain areas are increasing or decreasing over time. For example, if you see that net income is increasing, that usually means that the company is making more money. If you see that net income is decreasing, that usually means that the company is not making as much money as it once was – which means that there could be some problems.
Financial Reports are Important
We cover these reports and their importance in future articles. Stay tuned!