How to Analyse a Financial Statement?📚 Let's Find out⤵️ (1/12)

 Financial statement analysis is the one go-to analysis you should do before investing in any company. 

It is used by shareholders as well as stakeholders to evaluate the business for better decision-making to understand the overall health of the company. (2/12)

It is the process of analysing and assessing:

1⃣Profit & Loss 

2⃣Balance Sheet  

3⃣Cash Flow Statement of the company.

Let's understand each financial statement individually⤵️ 

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• Profit & Loss Statements

P&L gives a good picture of the Profitability of a company.

P&L statement showcase all the expenses incurred and revenue generated during a financial year. 

Thus, the statement is divided into two sections, namely: 

➡️INCOME 

➡️EXPENSES. 

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➡️Income includes revenue generated frm operations & other income. Revenue frm operations is generated frm core buss & other income is d income frm intrst such as banks, div income, etc. 

➡️Expense includes all the costs associated with production, salaries, int exp, etc(5/12)

• Balance Sheet

After preparing the profit & loss statement, you move forward to the Balance Sheet, which shows the company's financial position in a given financial year. 

It is divided into segments, namely:

➡️Shareholder funds

➡️Assets 

➡️Liabilities. 

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➡️Shareholder's fund is the sum of money a company owes to its shareholders. 

That means this is the number of funds that have been raised from outside the company in the form of shares. (7/12)

➡️Assets are the resources owned and controlled by a business. These Assets are expected to generate revenues for the business.

➡️Liabilities are the total sum of money the company is liable to pay to its creditors.

These three items are the crux of a Balance Sheet. 

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• Cashflow Statements 

The inflow and outflow of cash are clearly depicted in the Cash Flow Statement.

The cash flow statement is divided into 3 sections:

➡️Cash flow from Operating Activities

➡️Cash flow from Investing Activities

➡️Cash flow from Financing Activities 

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➡️Cashflow from Operating Activities shows the inflow and outflow of cash generated from the main activities of the business.

➡️Cashflow from Investing activities happens due to buying and selling of fixed assets, or income from any kind of investment done or loan given.(10/12)

➡️Cashflow from Financing Activities

The cash flows used to finance the activities of the company such as the issue of shares, repayment of loans, and the dividend paid all come under cash flow from financing activity.(11/12)