Understanding Financial Statement
What is a financial statement? In common term, financial statement shows you where a company’s cash came from, where it went and where it is now. Reading a financial statement can be hard to some persons however once you learned the basics of financial statement, it will be simple just same as reading an electricity, credit card bill or bank statement of account.
Basically, is is not difficult. If you know how to understand a billing statement from banks or service companies, you will know how to read a financial statement. Understanding basic financial statement is easy, it just requires little patience.
Perhaps you are thinking why do you have to understand a financial statement. As I said before, a financial statement will impart you an idea of a company’s financial situation. It is very important for a person to know the financial condition of a company before he purchases its stocks or some investment it sells.
A financial statement will tell you whether a company has many assets or many liabilities. It is designed in order to easily understand by ordinary people who are not inclined to complex financial accounting or calculations. It is really easy and commonly it is in tabulated form just similar to any kinds of billing statements.
A financial statement can be categorized into four parts: balance sheets, income statements, cash flow statements and statements of shareholder’s equity. Balance sheets view what a firm owns or its assets and what it owes or spends at a fixed point in time for instance in a fiscal year. Income statement is a company’s financial statement that indicates how the revenue is transformed into the net income.
In a financial statement, a cash flow statement specifies how cash comes in and out in the balance sheet and income of the company and gives the investing and financing events of the company. The fourth portion is the statement of shareholder’s equity that gives the changes on the company’s shareholders over a duration of time.
In conclusion, a financial statement is a helpful tool to evaluate if the company is a good company to buy in terms of investing in its stocks. It is the representation of the financial status of the company and it gives the over-all performance done by the company in a certain period.
Gil Tenorio loves blogging on personal finance, saving and investment. He loves playing guitar and vegetable gardening. He lives in Korea with his family. To get more information on how to invest in Philippine Stock, feel free to go Financial Management, for free financial management posts on saving, investing and make money online.
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