Friday, 4 October 2013

3 Important Financial Statements for Investors

There are 3 important financial statements to the fundamental investors. They are:

1) Income Statement
2) Balance Sheet
3) Cash Flow Statement

Here are the brief descriptions of the components of the 3 financial statements. Each component contains several sub-components themselves.

Revenue – Amount of money earned by the company.

Expenses – Cost of running the company and business.

Profits – Difference between revenue and expenses

Current assets – Assets that the company can use up or liquidate within the year of assessment. Non-current assets are the opposite.

Current liabilities – Debts that the company needs to return within the year of assessment. Non-current liabilities are debts that the company takes more than the current assessment year to pay back.

Equity – Difference between total assets and total liabilities.

Paid in capital - The amount of money raised during the company’s Initial Public Offering.

Retained earnings – Cumulative profits earned by the company after subtraction of dividends payouts.

Cash flow from operation – Cash generated from company’s core business.

Cash flow from investment – Cash spent on capital investment or other activities in investment vehicles.

Cash flow from financing – Record of activities involved in debts, loans and dividends .


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