A. BALANCE SHEET
The balance sheet is one of the key financial statements issued by publicly owned companies. It summarizes a company's assets, liabilities and shareholders' equity. These three parts of the balance sheet show what a company owns, what it owes and how much shareholders have invested in the company.
The balance sheet is a snapshot in time with its components valued as of a specific date.
The balance sheet is the foundation for the basic accounting equation:
Assets = Liabilities + Shareholders\' Equity
The balance sheet derives its name from the fact that the two sides of it must balance out in accordance with the above formula. As with the personal balance sheet (or statement of financial position), assets and liabilities are listed in order of liquidity or maturity.
Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt.
Shareholders' equity represents what money investors have contributed to the company, plus earnings retained for investment rather than paid out in dividends or used to repurchase shares. (For more, see the article Breaking Down the Balance Sheet)
B. INCOME STATEMENT
The income statement is a key financial statement summarizing a company's financial performance over a specific accounting period, usually either a fiscal quarter or a fiscal year. The income statement displays a company's revenues, expenses, gains and losses over the given accounting period.
Based on these figures, the income statement also reports the company's net income or net loss for the period.
The income statement includes both operating and nonoperating activities. Operating activities pertain to the revenues and expenses of a company's core operations. For instance, the sale of groceries by a supermarket chain is an operating activity. The sale of real estate owned by the supermarket chain would qualify as a nonoperating activity. (For more, see the article Understanding the Income Statement.)
Statement of Cash Flows and Pro Forma Statements
InvestingLearn about the components of the statement of financial position and how they relate to each other.
Managing WealthKnowing what the company's financial statements mean will help you to analyze your investments.
InvestingBasically, the balance sheet shows how much a company is worth, while the P&L statement reveals if a company is profitable or not.
InvestingBy Bob Schneider Financial statements present the results of operations and the financial position of the company. Four statements are commonly prepared by publicly-traded companies: balance ...
InvestingIf you know how to read it, the balance sheet provides valuable information on a potential investment.
InvestingFinancial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
InvestingDiscover how to keep score of companies to increase your chances of choosing a winner.
InvestingThere is plenty of information about a company that you'll want to know as a value investor, but that you can't get from a casual glance at a stock quote or from reading most stock market commentary. ...
InvestingCompanies have ways of manipulating their balance sheets that investors should be aware of.
InvestingThe best way to analyze a company—and figure out if it's worth investing in—is to know how to dissect its income statement. Here's how to do it.