There are certain factors that investors should pay attention to when they are looking at a company’s financial report, explains Carlos Hank Rhon. Public companies can provide a wealth of information to investors when it comes to their financial obligations over the years. But if you do not know how to read a financial statement or do not know what you should be looking for it can be very easy to get confused and overwhelmed at all of the statistics. There are various types of reports that are released by companies to investors that range from quarterly reports to annual reports and various types of press releases. One reason why there is so much information that can be found inside of these statements is because these documents are the most vital pieces of information that an investor will get from a company. By reading these financial statements carefully, investors are able to get a better overall realization on what is going on within the company that they have invested their money into, notes Carlos Hank Rhon. If you are an investor and you are starting to look over a company’s recent financial statements, there are a few things that you should always take a closer look at.
The earnings and revenue growth of a company is one of the most important things that you should look at if you are an investor. This is the bottom line and will tell you how much a company earns over a specific amount of time and if it is boosting its sales from one quarter to the next. This will also inform you if a company is on a growth spurt or facing a potential decline in the future. The key factors that can help determine how much a company is worth can be found in the earnings and revenue growth statements. You will be able to get this helpful information from various resources such as the company’s press release statements, the quarterly reports (10-Q) or the annual reports (10-K). These reports will have all of the critical financial statements that you will need which will include the balance statement, the income statement and the statement of cash flow. Which are all very important factors that you should look at very closely as well.
The overall cash flow and cash flow trends of a company should be looked at carefully when you are an investor, explains Carlos Hank Rhon. There is a difference between what a company says that it has earned using basic accounting methods and how much a company actually makes. Cash is always referred to as money in hand and not the result of any type of accounting measurements as in the case with net income and other forms of earning. When a company’s net income is higher than its cash flow, investors want to know about it and find out the reasons why. Therefore understanding the cash flow situation for a company is key when it comes to what investors need to look out for.
Just as many individuals do on a regular basis, many companies both large and small can go overboard with borrowing too much money and get over their heads in debt. Debt is not necessarily a fatal thing for many companies however it is important that a company is able to generate proper cash flow in order to make up for the debt payments that need to be made. It is important for investors to fully understand how much debt a company has and how they plan to pay off that debt before they decide to invest any amount of money into the company. This will require the investor to examine the company’s balance sheet and income statement as well as some other financial documents.
For more details, please visit: http://carloshank.wordpress.com/2012/07/14/why-financial-statements-are-important-to-investors/
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