So you’re a rocket scientist? Well, we’re impressed, even if Shania Twain’t. When it comes to analyzing a company’s financials, however, making sense of all those numbers unassisted is beyond even the best of us – which is why a helping hand can be so valuable 😌
Knowing your way around a firm’s past and present financial statements allows an investor to really understand that company: its hopes, its fears, and its dirty little secrets. There are three main documents to deal with: the income statement, the cash flow statement, and the balance sheet.
The income statement details revenues, expenses, and resulting income relevant to a given period – usually a quarter, a half year, or a whole 12 months. The cash flow statement outlines a firm’s sources and uses of cash across operating, investing, and financing activities. The balance sheet, meanwhile, summarizes all assets owned, their value, and how they’ve been financed – crystallizing the company’s financial position at a single point in time 💎
A financial analyst examines trends in key financial metrics, calculates and interprets ratios, compares those to the firm’s competitors’ – and much more besides. It’s not rocket science, but it’s worth getting right. So without further ado, let’s blast off.
