Key financial data can be obtained from the income statement, balance sheet and cash flow statements but the objective of examining these data must be for a purpose such as gauging profitability or financial safety. The statement of financial position or balance sheet indicates what a company owns (assets), what it owes (liabilities) and sources of capital at any given point in time. The analysis of a company’s assets is an integral part of balance sheet analysis and one key area of focus is the type of asset and whether it is tangible or intangible.
It is imperative that investors understand financial instruments before investing in them. But what constitutes understanding of that particular financial instrument, especially stocks?
Apart from company-specific information that is found in documents such as annual reports for listed equities, there has to be an adequate framework for analysing financial data, particularly from the company’s main financial statements.
