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4. Financial Statements 101

Financial Statements 101
Financial Statements
There are three main financial statements that can provide crucial
information on the financial health and business activities of a company.
You will use parts of each when building your financial models.
The three main financial statements are:
1) Income Statement
2) Balance Sheet
3) Statement of Cash Flows
Income Statement
The income statement focuses on a company’s revenues (and
other gains) and expenses (and other losses) throughout a
particular accounting period.
It’s primary purpose is to show efficiency and profitability of a
company’s business activities.
Balance Sheet
A look at a company’s assets, liabilities, and owner’s equity at a given point in
time (a “snapshot”).
A balance sheet shows what a company has and what it owes. A key limitation is
that it only reflects one point in time.
To reconcile the period between two balance sheets, we can analyze the
company’s income statement for this time.
Statement of Cash Flows
The statement of cash flows illustrates how a company accumulates cash through its
operations and external investments, and how it uses its cash for business activities and
Because most payments are not made in cash, the income statement does not fully reflect a
company’s use of cash.
The statement of cash flows helps reconcile any discrepancies between a company’s business
activities and its ability to efficiently use cash (quality of earnings).
Financial Statements
All publicly traded companies release their financial information.
Nearly all publicly traded companies will publish this information on an
“Investor Relations” section in their website.
Financial Statements
The main document of interest will be Form 10-K. You can find this
either on the company’s website or the SEC’s website.
Want to Learn More?
Course: https://www.coursera.org/learn/wharton-accounting
• Financial statement, accounting knowledge (balance sheet, cash flows,
income statements)
• Four week course  13 hours total