Financial Statement Basics - Overview

The Only difference between Rich and everyone else is that, Rich know how to read Financial Statements and how to analyze them. Remember, Rich always think in Financial Statements.
If you want to be Rich and Super rich than you MUST learn, “How to Read Financial Statements”
This Short course will cover all the basic aspects of Financial Statements. After reading this whole the short course, You will learn What is Financial Statement, What is the importance of it and How to read and think in Financial Statements like Rich.
Reading, Analyzing & Thinking in Financial Statement is Fun and Excitement………..!!!!!!! You will N’joy it a Lot…..!!!!!
Overview of Financial Statement -
See the Figure above. It is an Oversimplified Line Diagram of a Financial Statement.
I will teach you all the basics of Financial Statement in very Simplified Language and oversimplified Diagrams so that you will be able to understand it in more deep and more details.
Each Financial Statement has 2  major Parts. (See the Figure)
1) Income Statement &
2) Balance Sheet
Again both of these 2 major parts are subdivided into 2 more parts. Income statement has 2 subparts, Income & Expense while Balance Sheet has 2 subparts, Asset Column & Liability Column.
So In Short, Financial Statement has 4 basic Parts, Income, Expense, Asset Column & Liability Column. If you want to be Rich than you have to understand each part of Financial Statement in very detail and not only this but you have to understand the correlation between each of the four parts.
Each part of the Financial Statement has its own characteristics and each part is correlated with different other parts of the Financial statement in different way. And this connection between various parts of the Financial Statement generate various types of Cash flow patterns in Rich, Middle Class, Poor & Ultra-Rich.
Virtually all the Personal Finance advises (Frugality, budgeting, Investments, Reducing expenses, Debt reduction, Credit card debt elimination, Spend less than you earn and every other Financial advise……..) are originated from the Financial Statement only. So Learning the Basics of Financial Statement will cover all of these Personal Finance advises in Simple and easy to understand languages.
Who has Financial Statement?
Any Separate Financial Entity has its own Personal Financial Statement. In other words, anything on this world, that is related to Money has its own Personal Financial Statement.
Individuals, Corporates, Publically Listed Companies, Businesses, Rental Properties, Investments, Government….. all of them have their own Financial Statement. When a doctor see and analyze your Blood & Urine Reports, ECG, X-ray, Sonography and other Investigations, they can judge your Health.
The same is true about your Financial Statement. Financial Statement is the report of your Financial Health. By reading and analyzing Financial Statements, you can judge the Financial Health of that Individual, Business, Company, Government or Rental Property……!!!!!!!!
Remember -
- Most of the time people judge anyone’s Financial Health and well beingness by watching their Expensive Cars, Clothes and Expensive Life style. But you should remember that, you can not and you should not judge anyone’s Financial Health without watching and analyzing their Financial Statements.
If someone tells you that, Some so and so fellow is rich than you should tell your self that, May be he/she is Rich but I can’t judge it without reading his/her Financial Statement.
- Another Common mistake people do in India is that they judge any Business or Company’s Financial Health by rumor only. They fill IPOs and invest in the stocks of the companies by blindly following rumors and Hot Tips. But you should check and analyze the Financial Statement of any Company before applying for its IPO (Initial Public Offering) or buying a stock of that Company from the stock market. Most of the people of India and this world don’t know how to read financial statements and this is the reason they always lose their money in the stock market. If you have learned to read Financial statement than you should have invested in fundamentally strong companies and thus in the down market also you won’t feel any discomfort.
People earn a lot of money from their Professional career. But when it comes to making and investing Money they simply follow the advise of Brokers or divert their money to someone else to manage it. The reason is because they don’t know how to read and analyze the Financial statements so they can’t make Informed Investment Decision.