Using the Statements to Measure Financial Health
The financial statements tell different but related stories about how well your company is doing financially:
• The income statement shows the bottom line. Using the rules of accounting, it indicates how much profit or loss a company generated over a period of time—a month, a quarter, or a year.
• The balance sheet shows whether a company is solvent. It provides a snapshot of the company’s assets, liabilities, and equity on a given day.
• The cash flow statement shows how much cash a company is generating. It also tracks, in broad terms, where that cash came from and what it is being used for.
Now you’re ready to take the next step: interpreting the numbers these statements provide. For example, ...