Lets start with the basics. A companys story is told primarily in three pieces of paper, the income statement (how is the company doing? How much in sales, how much in expenses and whats the bottom line?) The cash flow statement (remember, the income statement is an accounting statement. The cash flow statement will show how much cash comes in and goes out of the company through what activities) and the balance sheet (it shows the companys financial position for a certain date. For example on December 31, 2016 Company X has this much in assets, liabilities and net worth).

Now, I want you to take a look at a certain company and tell me what you see. Simply copy and paste this link https://www.sec.gov/ix?doc=/Archives/edgar/data/27996/000002799617000028/a2016123110-k.htm (Links to an external site.)Links to an external site. in your browser, which shows the companys financial statements. If you scroll down just a little, on the top of the filling you see a the title item 6, selected financial data. Click on that and it will take you to a page in the document that summarizes the companys financial information for the last 5 years. Take a look at it and see if you can understand the development of this company. Seems hard? Not really. First understand what the company does and the rest comes easy to you. Read the business description, they are primarily in the business of creating bank checks. Now, does it sound like a booming industry when credit and debit transactions taking over the world and cash and check are becoming irrelevant? Now take a look at the same financial information and see if you can uncover some clues about this companys performance over the years. Pay attention to revenue, debt, orders taken, etc.

The best part of the financial statement analysis is that the company is required to tell you by law how it has performed and why. Simply take a look at page 24 of the same document under Executive Overview and tell me what management is telling you about this companys performance.

Dont get confused. Small steps, ask questions if there are parts you dont understand. What does the company do, what is your impression of its financial figures and what are the managements explanations?