okay very well we learned about credits
and debits income statements and balance sheet items T accounts the double-entry
principle the accounting equation timing of cash flows and much more
here comes the fun part we are ready to open a company’s financial statement and
analyze its performance every firm is required to produce
financial statements which show the development of its business throughout
the preceding period quarter semester or year large firms usually have to provide
a significantly greater level of detail due to the complexity of their
operations a financial statement contains a balance sheet an income
statement a statement of cash flows and a discussion by management larger companies are also required to
provide an extensive set of footnotes which show us the breakdown of important
items within the balance sheet and the income statement
such notes can be useful because oftentimes they allow us to understand
what stands behind aggregated figures smaller companies prepare financial
statements only once per year while in most countries listed firms which are
typically bigger have to provide a financial report every three months in
the United States the annual report required by the Securities and Exchange
Commission is called Form 10-k it is prepared once per year and shows how the
company performed during the past 12 months
along with that it includes information about its history organizational
structure executive compensation equity and subsidiaries some companies include
their 10k reports within their annual report but others don’t you should be
aware of that as if you are trying to learn more about a particular company in
the United States a 10k report could be a great source of information our next
lesson will be much more practical we will take a look at the annual report of
one of the largest companies in the US Procter & Gamble and we’ll describe the
information that is contained within its annual report