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Introduction
How many times have you flipped to the back of a
company's annual report and found yourself blankly staring at the pages of
numbers and tables? You know that these should be important to your
investing decision, but you're not quite sure what they mean or where to begin.
In Lesson 3, we're going to take our first major
step towards changing that. Smart investors have always known that
financial statements are the keys to every company. They can warn of
potential problems, and when used correctly, help determine what a business is really "worth". An investor who understands financial statements will
never have to ask "is this company a good investment?".
For every business, there are three important
financial statements you must look at; the Balance Sheet, the Income Statement,
and the Cash Flow Statement.
The balance sheet tells investors how much money the company has, how much it
owes, and what is left for the stockholders. The cash flow statement is
like a business' checking account; it shows you where the money is spent.
The income statement is a record of the company's profitability. It tells
you how much money a corporation made (or lost).
In this lesson, we are going to learn to
analyze a balance sheet. There are two segments: in the first, we will go through a typical balance sheet and explain what each
of the items means. In the second, we will actually look at the balance
sheets of several American corporations and perform basic financial calculations
on them.
Grab a
cup of coffee, a nearby calculator and let's begin!
Next page > How to get a
copy of a company's balance sheet > 1,
2,
3,
4,
5,
6,
7,
more >>
Quiz > If you've already read this
lesson, skip to the third quiz
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