The Basics of Company Financial Reporting
A company is in operation to make money. If it is not making money, then it needs to change its business in a way that could enable it to be profitable. But how does one determine whether a company is making money? Public companies and private companies provide charts of financial numbers to the SEC and state regulatory agencies that are important to read and analyze. One is called the income statement, and the other is called the balance sheet. Both are equally valuable in the information they contain and the story they convey about a company's performance. Yet, too often, business writers focus on the income statement and ignore the balance sheet, as well as another, the cash-flow statement.
An income statement is a chart that records a company's financial performance. To the experienced reader, the income statement tells dozens of stories and gives plenty of clues about a company's financial performance. It details a company's sales, its expenses, and its profits. A company typically provides its income statement for a 3-month period, known as a fiscal quarter, and compares the performance in that time with the same three months of the previous year. Analysts should not compare one quarter with the previous quarter. The comparison may not be