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.
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.
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