Financial Statements

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Financial Reports: How to Read the Balance Sheet for Long-Term Assets

Assets that a company plans to hold for more than one year belong in the long-term assets section of the balance sheet. For financial reporting, this section shows you the assets that a company has to [more…]

Financial Reports: How to Read the Balance Sheet for Accumulated Depreciation

On a balance sheet, you may see numerous line items that start with accumulated depreciation. On the financial report, these line items appear under the type of asset whose value is being depreciated or [more…]

How to Read Financial Reports for Liabilities

Companies must spend money to conduct their day-to-day operations, which must be accounted for on financial reports. Whenever a company makes a commitment to spend money on credit, be it short-term credit [more…]

How to Read Financial Reports for Equity

The final piece of the balancing equation for financial reporting is equity. All companies are owned by somebody, and the claims that owners have against the assets the company owns are called [more…]

How to Read the Income Statement for Financial Reporting

The income statement is the part of the financial report where you find out whether a company made a profit or took a loss. You also find information about the company's revenues, its sales levels, the [more…]

Financial Reports: How to Read the Income Statement for Sales Adjustments

Not all products sell for their list price. This will be accounted for on the income statement in the financial report. Companies frequently use discounts, returns, or allowances to reduce the prices of [more…]

Financial Reports: How to Read the Income Statement for Cost of Goods Sold

Like the Sales line item, the Cost of goods soldline item has many different pieces that make up its calculation on the income sheet. You don't see the details for this line item unless you're a company [more…]

How to Use Financial Reports to Track Total Asset Turnover

You can look at how well a company manages its assets overall by using financial reports to calculate its total asset turnover. Instead of just looking at inventories or fixed assets, the [more…]

How to Read Financial Reports for Expenses

Expenses include the items on a financial report that a company must pay for to operate the business that aren't directly related to the sale and production of specific products. Expenses differ from the [more…]

Financial Reports: How to Read the Income Statement for Profit and Loss Types

For readers of financial statements, bottom-line numbers don't tell the entire story of how a company is doing. When you hear earnings or profits reports on the news, most of the time, the reporters are [more…]

How to Use Financial Reports to Calculate Earnings per Share

In addition to net income, the other number you hear in financial reporting almost as often about a company's earnings results is earnings per share. Earnings per share [more…]

Financial Reports: What Will You Find on Statement of Cash Flows?

Basically, a statement of cash flows gives the financial report reader a map of the cash receipts, cash payments, and changes in cash that a company holds, minus the expenses that arise from operating [more…]

Financial Reports: How to Read the Statement of Cash Flows for Operating Activities

The operating activities section is the part of the statement of cash flows on financial reports where you find a summary of how much cash flowed into and out of the company during the day-to-day operations [more…]

Financial Reports: How to Read the Statement of Cash Flows for Investing Activities

The investment activities section of the statement of cash flows on the financial reports, which looks at the purchase or sale of major new assets, is usually a drainer of cash. Consider what this section [more…]

Financial Reports: How to Read the Statement of Cash Flows for Financing Activities

Companies can't always raise all the cash they need from their day-to-day operations. Financing activities listed on financial reports are another means of generating cash. Any cash raised through activities [more…]

Financial Reports: What You Should Know about Special Line Items on the Statement of Cash Flows

Sometimes you see line items on the statement of cash flows that appear unique to a specific company. For financial reporting, businesses use these line items in special circumstances, such as the discontinuation [more…]

How to Read the Accounting Policies Note on Financial Reports

The first note in almost every company's financial report gives you the ammunition you need to understand the accounting policies used to develop the financial statements. This note explains the accounting [more…]

How to Read Financial Report Notes for Mergers and Acquisitions

Sometimes one company decides to buy another or merge with another. If a company acquires another company or merges during the year the annual report covers, a note to the financial statements is dedicated [more…]

How to Read Financial Report Notes for Pension and Retirement Benefits

You may not think of pension and other retirement benefits on financial reports as types of debt, but they are. In fact, for most companies that offer pension benefits, the amount of money they owe their [more…]

How to Find Red Flags in the Notes of a Financial Report

Companies love hiding their dirty laundry in the small print of the notes to the financial statements. As you read through the notes, keep an eye out for possible red flags. [more…]

How to Use Financial Reports to Find the Current Ratio

One of the most commonly used debt-measurement tools in financial reporting is the current ratio, which measures the assets a company plans to use over the next 12 months with the debts it must pay during [more…]

How to Read Consolidated Financial Statement Notes

The eliminations to adjust for reporting subsidiary results don't show up in the parent company's financial reports unless some portion of the stock acquisition takes place in the year that's being reported [more…]

How to Use Financial Reports to Calculate the Price/Earnings Ratio

The financial reporting profit number you hear discussed most often in the news is the price/earnings ratio, or the P/E ratio. Basically, the P/E ratio looks at the price of the stock versus its earnings [more…]

Financial Reports: How to Use the Price/Earnings Ratio to Judge Company Market Value

For financial reading purposes, how do you know what a reasonable P/E ratio is for a company? Historically, the average P/E ratio for stock falls between 15 and 25. This ratio depends on economic conditions [more…]

How to Read Financial Reports for the Dividend Payout Ratio

The dividend payout ratio looks at the amount of a firm's earnings on financial reports that it pays out to investors. Using this ratio, you can determine the actual cash return you'll get by buying and [more…]

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