The Easy Way for Investors to See and Assess Companies Through Financial Statements


The Easy Way for Investors to See and Assess Companies Through Financial Statements

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A company’s financial statements can be used as a tool to assess how the company is running and developing. Financial statements can be used as an illustration to assess how the performance of a company. For investors and potential investors, financial statements can make them confident or not to provide additional investment funds.

This is because the information in the financial statements can provide the results of an analysis of how the company will develop the investment fund to then be made a profit for investors. Because for investors, paying attention to the numbers contained in the financial statements is mandatory.

In addition to knowing the company’s performance, financial statements also provide an overview of financial management and how the company’s system works. The following will explain how investors value a business through their financial statements.

Understanding Balance Sheet Components

A balance sheet is a financial statement that reflects how a company’s financial position is. The balance sheet consists of assets (assets), liabilities (debt), and equity (capital). Assets or also called assets can be defined as everything that the company has. Whereas liabilities (liabilities and equity) can be said as everything that a company does to obtain or finance assets.

Liability (debt) can be said as anything that must be paid by the company. Liabilities consist of two, current and non-current liabilities.

Understand the Income Statement

Income Statements can be defined as a summary of the company’s activities in a certain period. This report describes the net results (profits) or losses incurred (losses) from all types of business activities carried out by the company.

Understanding Equity Reports

Put simply, the notion of equity can be interpreted as the magnitude of the rights or interests of the company’s owners on company property. The term equity comes from the word equity or equity of ownership, which means the company’s net worth. A statement of changes in equity contains figures showing changes with a description of an increase or decrease in net assets as well as wealth during the period in which the report was made

Understand the Cash Flow Statement

This report describes the cash receipts and disbursements of a company during a certain period. The Cash Flow Statement is then grouped into three sections namely operating, investing and financing activities. From this Cash Flow Report, investors can find out whether the company to be funded is sufficient or not to be able to distribute dividends.

In addition, this report also explains what actually happened to the company. From this cash flow statement it can be seen that even though the company suffered losses, it can still live if the cash flow shows a positive number. In addition, investors can see free cash flow (operating cash flow minus capital expenditure).

A company that has free cash flow growth can be concluded that the company has good prospects both now and in the future. This is because the company still has enough money to expand.


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