Financial statements are reports prepared by a company’s internal management that reports the financial performance of the company. Furthermore, the balance sheet and the income statement are amongst the most imperative and popular financial statements. These statements are prepared to give users outside of a company such as investors and creditors an insight towards the financial position of the company. Moreover, financial statements are the main source of information that the management, investors and creditors use for their decision making, thus, there is a heavy emphasis on the accuracy, reliability, and relevance of the information on these financial statements.
Every year all publicly traded companies are required by law to publish their financial statements annually. Furthermore, these statements are of great importance for both internal and external users as the management will use the annual report to make informed decisions. Not only that, creditors and investors use these statements to understand the financial performance of the company and make decisions regarding investing or lending money to the company respectively. Moreover, these annual reports are quite easy to locate, you will firstly decide which publicly traded company would like to analyze; then, simply Google the company’s name, year and annual report. It’s best to download annual reports from the actual company’s website as mostly all publicly traded companies will publish it to their personal websites.
Before investing in a publicly traded company an investor performs fundamental analysis on a company to find the intrinsic value of a security. Furthermore, to measure the intrinsic value of a stock, fundamental analysis must be performed using publicly available data from financial statements. Furthermore, much of this data is made available straight from the statements such as revenue and net income; however, some is calculated using the financial statements such as earning per share and profit margins. Moreover, Simplified Investing is a tool which you can use to compute financial ratios, from the data made available from the company’s financial statements reported on the annual reports to measure the intrinsic value of the security.
