The three financial statements

"If it's written so you can't understand it, I get very suspicious. I probably won't invest in a company where I can't understand a footnote, because I figure they don't want me to understand it."

If it's written so you can't understand it, I get very suspicious. I probably won't invest in a company where I can't understand a footnote, because I figure they don't want me to understand it.

Every public company publishes three documents that, read together, tell its complete financial story.

The income statement covers a period of time - a quarter, a year - and shows revenue at the top, all the costs below it, and net income at the bottom: what's left after paying for everything, including taxes.

The balance sheet is a snapshot taken at one precise moment: on one side everything the company owns, on the other how much it owes creditors and how much would be left for shareholders if it paid everyone back.

The cash flow statement tracks the money that actually comes in and goes out - split between operating activity, investing and financing. It's the basis for calculating free cash flow, the topic of the next lesson.