The income statement, also known as the profit and loss statement, shows the company's revenues, expenses, and net income over a specific period. In my experience, it's essential for understanding the company's profitability and assessing its ability to generate profits in the future. It also helps me identify trends in revenue growth and cost management.
The balance sheet, on the other hand, provides a snapshot of the company's assets, liabilities, and equity at a specific point in time. I like to think of it as a picture of the company's financial health. It helps me evaluate the company's liquidity, solvency, and overall capital structure, which are all critical components of a strong financial foundation.
Finally, the cash flow statement is a vital tool for understanding how cash moves in and out of the company during a specific period. It's broken down into three sections: operating activities, investing activities, and financing activities. In my experience, analyzing cash flow is crucial for assessing a company's ability to meet its short-term obligations and fund its long-term growth.