This article will provide an introduction to financial statements, and for more information, check out our course on how to read financial statements. Our mission at Pareto Labs is to help you elevate your game at work, and understanding the language of business is going to give you a big advantage. We save you time by distilling this subject into the core concepts that you can easily learn and immediately put into practice at work.
Why is it important to understand financial statements? First, it will enable you to then understand any business, just by looking at the financial reports. Second, finance is the plumbing of business, and knowing it will help you make better decisions at work and better understand the decisions other leaders make. It will also help you understand how your job directly impacts the financial performance of the company. You’ll be amazed at how much you can do with a few core principles and some grade school math.
There are three financial statements that every company uses: The income statement, the balance sheet, and the cash flow statement. The income statement shows the amount of sales, expenses and profit flowing through a business measured over a period of time. That period could be a month, a quarter or even a year.
The balance sheet shows the amount of money tied up in a business at a certain point in time. It answers the questions: Where did the money for this business come from? And how is that money currently being used?
Finally, our favorite of them all…the cash flow statement, which summarizes how cash was either generated or used up over a period of time.
It may seem intimidating, but here’s why you don’t have to worry. Every company uses these same three statements. And while some companies may add a little more detail or a little less detail, or use different words here and there, the structure is always the same. In our course you will master this structure as we go line by line through the Apple 2018 Financial Statements, and by the end you will have the framework to read and understand the financial reports of any company. Every publicly traded company must make the three financial statements available to everyone. The name for these reports is 10-Q for quarterly reports and 10-K for annual reports. And you can download them directly from the SEC.gov website.
For more information, check out Pareto Labs’ course on how to read financial statements.
Pareto Labs offers engaging on demand courses in business fundamentals. Built to help you elevate your game at work, our courses distill complex business topics — like how to read financial statements, how to manage people, or even how to value a business — into digestible lessons. No business background required. Our library of 200+ lessons will teach you exactly what you need to know to use it at work tomorrow. Sign up for a free trial today to start watching.