The financial statement review<\/a> starts with the balance sheet, which covers the book value of the respective business. It showcases the resources, their availability and the financing behind them.<\/p>\n Those reading the audit will also see the liabilities and assets, not to mention the owners\u2019 equity. Each component tells a different story about the company\u2019s financial health.<\/p>\n In theory, the way it should be seen revolves around the assets, which come together as the sum of all liabilities and the owners\u2019 equity. What does each of these things mean then?<\/p>\n The balance sheet serves as an important financial document that helps stakeholders understand the company’s financial position at a specific point in time.<\/p>\n The income statement covers the effects of gain, expense, revenue and even loss transactions. It\u2019s given over a particular period of time, such as every three or 12 months.<\/p>\n The revenue is what goes in, while expenses cover what goes out. Cost of goods sold is the cost of the production, import or manufacturing of whatever the respective business sells.<\/p>\n The gross profit is the total revenue, but without the costs of goods sold.<\/p>\n While these are the main things, there\u2019s more to cover:<\/p>\n All these things will help you understand if a business is profitable, how much it spends to produce something, whether or not there\u2019s some cash to go back into it and so on. Financial trends<\/a> are also considered in this audit.<\/p>\n The cash flow statement is extremely important when learning how to read a financial report. It offers a bigger image of what happened to the cash during a particular period of time.<\/p>\n\n
Reading the Income Statement<\/strong><\/h2>\n
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<\/p>\nReading the Cash Flow Statement<\/strong><\/h2>\n