Reading Financial Statements

The Three Statements That Matter

Every US public company files detailed financial reports with the SEC — quarterly (10-Q) and annually (10-K). You don't need an accounting degree to use them; you just need to know where to look. Three statements do most of the work.

1. The Income Statement

Shows whether the company made or lost money over a period of time.

• Revenue — total money brought in from sales
• Net Income — what's left after all expenses, taxes, and costs are subtracted
• Earnings Per Share (EPS) — net income divided by total shares outstanding

2. The Balance Sheet

A snapshot of what the company owns and owes on a specific date.

• Assets — cash, property, equipment, inventory
• Liabilities — debt and other obligations
• Shareholders' Equity — assets minus liabilities, the company's true "net worth"

3. The Cash Flow Statement

Tracks actual cash moving in and out — separate from accounting profit, which can be misleading.

• Operating Cash Flow — cash generated from core business activities
• Investing Cash Flow — cash spent on or earned from investments and equipment
• Financing Cash Flow — cash from debt, stock issuance, or dividends paid out

Where to Actually Find These Filings

Every US public company's filings are free and public on the SEC's EDGAR database. Most brokerage apps also summarize the key numbers directly on a stock's page, so you rarely need to read the full 10-K to get the headline figures.

Key takeaway: the income statement shows profit, the balance sheet shows financial health, and the cash flow statement shows whether the money is real. Together, they tell you far more than the stock price alone ever could.

Frequently Asked Questions

What's the difference between a 10-K and a 10-Q?

A 10-K is the detailed annual report filed once a year. A 10-Q is a shorter quarterly update filed three times a year, covering the periods between 10-Ks.

Why can a company have profit but still run out of cash?

Accounting profit includes non-cash items and money owed but not yet collected. A company can show a profit on paper while its cash flow statement reveals it's not actually collecting cash fast enough to cover its bills.

Do I need to read the full 10-K before buying a stock?

Not for most casual investors — brokerage apps and financial sites summarize the key numbers. Reading the full filing becomes more valuable as your investment size and conviction grow.