How to Read Financial Statements P. 1 - Income, Cash Flow, Balance Sheets Tutorial

Go to http://www.BayStateProperty.com for MORE QUALITY Investing and Finance videos just like this one! How to Read Financial Statements P. 1 - Income, Cash Flow, Balance Sheets Tutorial Net income is the "bottom line"; it is expressed both on an actual and, after comprehensive income, on a per share basis. If a company has hybrid securities, like convertible bonds, there is the potential for additional shares to be created and earnings to be diluted. Earnings per share may therefore be presented on basic and diluted bases, in accordance with the complex rules of FAS 128. Statement of Changes in Owners Equity A separate Statement of Changes in Stockholders' (or Owners) Equity is also prepared that reconciles the various components of OE on the balance sheet for the start of the period with the same items at the end of the period. The statement recognizes the primacy of OE for investors and other readers of financial statements. Statement of Cash Flows The cash flow statement tells you the sources and uses of cash during the period (in fact, the term "sources and uses statement" is a synonym). It also provides information about the company's investing and financing activities during the period. (To learn more see Analyze Cash Flow The Easy Way and What Is A Cash Flow Statement?) Under accrual accounting and the matching principle, accountants seek to record economic events regardless of when cash is actually received or used, with a view toward matching the revenues for the period with the costs incurred to generate them. But in addition to financial statements that include accounting entries that are theoretical in nature, users are vitally interested in the actual cash received and disbursed during the period. In fact, depending on the company and the user, the cash flow statement may be of prime importance. Like the income statement, the statement of cash flows is always for some period of time. The format of a cash flow statement is typically: Net cash flow from operating activities (sales, inventories, rent, insurance, etc.) Cash flow from investing activities (e.g. buying and selling equipment) Cash flow from financing activities (e.g. selling common stock, paying off long-term debt) Exchange rate impact Net increase (decrease) in cash Cash and equivalents at start of period Cash and equivalent at end of period Schedule of non-cash financing and investing activities (e.g. conversion of bonds)

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