Financial Report: In-Depth Study for Smart Investing

In the current investment landscape, where markets change rapidly, investors often rely solely on expert analysis or technical signals. However, making wise decisions requires factual data. Financial reports are essential tools that provide an overview of a company’s true performance. Systematic financial statements enable investors to clearly see a company’s quarterly or annual results.

What are financial statements and why are they important?

Financial statements or Financial Reports (Financial Statement) are summarized documents that organizations prepare to disclose their financial position and management performance over a specified period, whether quarterly or annually. This information helps stakeholders—from investors and creditors to management—make informed decisions.

Financial statements not only show profit or loss but also reveal:

• The company’s cash flow
• Assets and liabilities
• Debt repayment ability
• Capital management efficiency

Companies are required to prepare financial statements and submit them to tax authorities annually. Additionally, this data helps management strategize and evaluate future growth factors.

Main components of financial reports

Financial statements consist of four main reports, each reflecting different aspects of operations:

1. Balance Sheet (Balance Sheet) — A comprehensive snapshot of financial position

The Balance Sheet shows the company’s financial status at a specific point in time (such as December 31), displaying three key variables:

• Assets: everything owned by the company
• Liabilities: financial obligations to be paid
• Equity: the difference between assets and liabilities

The Balance Sheet helps investors assess financial stability, debt-paying capacity, and asset management strategies.

2. Income Statement (Income Statement) — Performance over a period

The Income Statement indicates the company’s operational results and profitability, showing:

• Total Revenue: income from sales and other activities
• Expenses: costs related to production, marketing, and other expenditures
• Net Profit/Loss: the final result after taxes

Management uses this report to analyze operational efficiency and refine strategies. It also serves as a basis for calculating taxes payable to authorities.

3. Cash Flow Statement (Cash Flow Statement) — Cash movement

The Cash Flow Statement details the sources and uses of cash, divided into three main categories:

• Cash flows from operating activities: cash from production and sales
• Cash flows from investing activities: cash spent on or received from asset expansion
• Cash flows from financing activities: cash from borrowing, issuing shares, or paying dividends

This report helps management plan cash usage better and understand the company’s operational capacity.

4. Statement of Changes in Equity (Statement of Changes in Equity) — Changes in capital

This statement shows changes in equity, which may result from:

• Issuance of new shares: increasing capital through share sales
• Accumulated profit or loss: retained earnings from previous years
• Dividend payments: distributing profits to shareholders

5. Comprehensive Income (Comprehensive Income) — All effects on assets

This report displays all financial impacts, including:

• Operating profit or loss: results from core business activities
• Market value changes: fluctuations in asset values based on market prices

Benefits and limitations of financial reports

Key benefits

1. Assess financial health: investors can determine if a company is financially strong or needs improvement

2. Informed investment decisions: provides a foundation for deciding whether to invest and at what valuation

3. Performance analysis: reveals profit sources and resource utilization

4. Risk management planning: identifies potential future financial risks

5. Shareholder value evaluation: understanding growth potential and dividend capacity

Limitations

1. Complexity: large companies have complex financial statements requiring in-depth accounting knowledge

2. Potential inaccuracies: some data may be recorded incorrectly or adjusted later

3. Numbers only: cannot fully capture all business complexities

4. Policy volatility: changes in accounting standards may affect comparability with previous years

How to read and analyze financial reports

When reviewing the Balance Sheet, ask yourself:

• What is the total value of assets?
• What is the total value of liabilities?
• What is the company’s net equity?

When reviewing the Income Statement, consider these questions:

1. Is revenue growing?: compare this year’s revenue with last year’s
2. Are expenses problematic?: check if expenses are increasing faster than revenue
3. How well is cost management?: observe the profit-to-revenue ratio
4. What is EBITDA?: Earnings Before Interest, Taxes, Depreciation, and Amortization, which measures true operational performance
5. Earnings per share: compare with previous years to identify trends

When reviewing the Cash Flow Statement:

Observe whether cash has increased or decreased due to specific activities, and whether cash flows are primarily from operations or borrowing.

Financial reports for non-profit organizations

Non-profit entities such as associations and charitable institutions also prepare financial reports to transparently show how donations and service income are used.

The financial statements of non-profits include:

• Income and expenditure statement: shows revenues and expenses
• Statement of financial position: shows assets, liabilities, and net assets
• Statement of changes in net assets: details changes in net assets from beginning to end of the year

How to access US stock financial reports

Investors can access information through various channels:

Company websites

Most publicly traded companies have “Investor Relations” or “Financials” sections on their websites for easy access to financial reports.

Financial data platforms

Websites like Investing.com, Bloomberg, Reuters, Yahoo Finance, Google Finance offer financial data in charts, tables, and related news.

Analysis reports

Stock analysts often publish in-depth analysis reports with investment recommendations.

Financial institution databases

Banks and financial institutions may provide Equity Research Reports or additional specific data.

Why study this before investing in stocks?

Assessing financial position: understanding if a company is financially healthy and capable of debt repayment

Informed investment decisions: providing a basis for choosing which companies to invest in and at what stock price

Performance analysis: recognizing profit-generating ability and resource management

Risk management: identifying potential financial risks in the future

Investing in US stocks after reviewing financial reports

After studying financial statements, investors can choose from several investment methods:

Traditional investing

Buying stocks directly through a broker, with rights such as dividends and voting rights.

Investing via CFD (Contracts for Difference)

CFDs are options for investors who want:

Advantages of CFDs:

• High leverage: up to 1:20, increasing returns with less capital
• Bidirectional trading: can buy (BUY) if expecting price rise or sell (SELL) if expecting decline
• No high minimum capital requirement: suitable for small investors
• Day trading: no restrictions on intra-day trading
• No financing costs: no additional charges

Disadvantages of CFDs:

• High risk: high leverage means losses can exceed initial capital
• Understanding leverage: improper use can lead to rapid losses

Comparison table:

Investors should carefully study leverage usage, as high potential gains come with high risks.

Summary

Financial reports are indispensable tools for investors aiming to make rational decisions. By studying and understanding the balance sheet, income statement, and cash flow statement, investors can evaluate a company’s financial status, analyze performance, and identify promising investment opportunities effectively.

Whether opting for traditional stock investment or CFD trading, investors must dedicate time to studying financial reports to truly grasp the core of the business before every decision.