How to Read Financial Statements

Understanding a company’s financial health starts with three key documents:

1. Balance Sheet – Snapshot of what the company owns and owes

• Assets: Cash, buildings, equipment—everything the company owns
• Liabilities: Loans, bills—everything the company owes
• Equity: Net worth (Assets minus Liabilities)

2. Income Statement – Measures profitability over time

• Revenue: Money earned from sales
• Expenses: Costs like rent, salaries, supplies
• Net Income: Profit or loss after expenses

3. Cash Flow Statement – Tracks actual cash movement

• Operating Activities: Cash from core business operations
• Investing Activities: Cash spent or earned from buying/selling assets
• Financing Activities: Cash from loans, investors, or repayments

Absolutely, Shemea. Here’s a streamlined summary of the “Financial Statements 101” infographic:

Financial Statements 101

Balance Sheet

Purpose: Shows what a company owns and owes at a specific point in time.
Key Elements:

• Current & Long-term Assets
• Current & Long-term Liabilities
• Shareholders’ Equity
  Formula:
  Assets = Liabilities + Equity

Income Statement

Purpose: Tracks revenue and expenses over a period to show profit or loss.
Key Elements:

• Revenue
• Cost of Goods Sold
• Gross Profit
• Operating Expenses & Income
• Other Income/Expense
• Net Income

Cash Flow Statement

Purpose: Shows actual cash movement in and out of the business.
Sections:

• Operating Activities: Net income, non-cash charges, working capital changes
• Investing Activities: Capital expenditures, investments
• Financing Activities: Issuing/repaying debt, issuing/repurchasing equity