Question: In your own words please give me your personal thoughts on the paragra

Question

Question:

In your own words please give me your personal thoughts on the paragraph below.

Yes, there is merits in analyzing financial statements of public companies. Analyzing financial statements allows anyone to get a snapshot of what is currently going on with a company. These statements are filled with a plethora of information and ignoring this information is like jumping out of a plane without a parachute. Current and potential investors and lenders need to analyze these financial statements to make any lending or investment decisions. The analysis of balance sheets, income statements and cash flow statements to discern a company's investment qualities provides a basis for smart investment choices into a company.

Explanation / Answer

There are three main financial statements investors analyze. They are the balance sheet, income statement and the cash flow statement. The balance sheet is a snapshot in time. It shows all the assets owned and liabilities owed for a company. It also shows the amount of equity or ownership that is paid for by investors. The income statement looks at the entire year. It starts with revenues and then deducts expenses for net income. The cash flow statement shows where the cash is really coming by breaking down cash flow into cash from operations, investing and financing. There are advantages and disadvantages to analyzing financial statements for investment decisions.

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