Introduction to Financial Statements

What are Financial Statements?

Financial statements are the medium by which a company discloses information concerning its financial performance. A financial statement of any company is its report card which shows how a company has fared in the last quarter / year and it is the most important aspect of fundamental analysis. It quantifies the company’s performance, strength, liquidity & profitability.

The numbers in a company's financial statements can be bewildering and confusing to many investors. However, if we know how to accurately analyse & interpret them, the financial statements are an ocean of information.

If you can develop a grasp of the definition of the balance sheet and the structure of an income statement, it would help you identify the "red flags" and "gold nuggets" of a company.

Three most important financial statements are: