Introduction to Financial Statement Analysis
by Joe Lan, CFA
Understanding financial statements is key to fundamental stock analysis and overall investment research. Financial statements provide an account of a company’s past performance, a picture of its current financial strength and a glimpse into the future potential of a firm.
This is the first in a new AAII Journal series on financial statement analysis. The goal is to enhance your ability to make a sound judgment about a company’s financial strength and future prospects by showing you the benefits of using financial statements in your personal investment research.
In this article
- Financial Statements and Their Key Elements
- How the Statements Are Linked
- Where to Find Financial Statements
- Accounting Standards
- Next in the Series
Share this article
Given the varied financial knowledge of our readers, I will address many topics that some may find very basic. However, to build a strong understanding of advanced topics, you need a solid foundation. As we progress through this series, I expect to touch on more advanced topics when explaining how I personally use financial statements to analyze a firm. In this introductory article, I explain the major components of each financial statement and why they matter in security analysis.
Financial Statements and Their Key Elements
The role of financial reporting for companies is to provide information about their fiscal health and financial performance. As investors, we use financial reports to evaluate the past, current and prospective performance and financial position of a company. These statements allow us to compare one firm to another and form the basis of valuing the worth of a stock.
To read more, please become an AAII member or CLICK HERE.