For example, if a penny stock's first quarter runs from January to March, it will report the total results for that period as its Q1 release. You can then compare those results to the prior quarterly report, or against the results achieved from the same quarter in previous years. Each quarter, companies release the following main financial reports:
- Income statement
- Balance sheet
- Cash flow statement
Financial reports intimidate most investors because they appear complicated or hard to understand. In truth, they're actually as easy to interpret as they are helpful to your understanding of the company.
If you're thinking about investing in a penny stock company, you should know exactly how much money it is bringing in from sales, and how much debt it has, for example. The financial reports tell you all of this.While financial statements are generally standardized from one company to the next, there can often be differences. For example, what one company calls "sales" on its income statement, another company may call "revenues," but the terms mean the same thing. And some terms — "legal expenses," "investment income," and "goodwill," for example — will vary depending on the underlying company's operations.