|
Stock value is derived from a company's long term ability to create cash profits from invested capital;
and financial statements are intended to give a snapshot of how successfully this creation of value is being accomplished.
But unless you're a professional accountant, you may find that a look at an annual report is like a visit to an alien planet; you'll encounter odd terminology, strange calculations, and of course big numbers.
This guide should help make things more accessible.
It explains the three important financial statements from the annual report of a fictitious company:
Income Statement
|
How good the company is at making money
|
Cash Flow Statement
|
How they're paying for their operations and their future growth
|
Balance Sheet
|
What the company owns and owes
|
Here is a general flow of cash.
|
