How to Understand the Four Types of Financial Reports TipRanks Provides on Companies: Overview; Income Statement; Balance Sheet; Cash Flow

While researching a stock, it is particularly important to study the company’s financial performance. TipRanks brings you all the relevant financial information about a company and updates the data regularly. We present the data in an easy-to-read tabular format for clear understanding. To open the Financials page, open the company that you want to study. On the left navigation bar, click on the Financials tab.  

TipRanks shows 4 sets of financial data, which are the heart of a company’s financials. By studying these data sets, you can easily gauge a company’s past, present, and future performance. These data sets are: 

Overview – Under this tab, you will find glimpses of all the important metrics from all financial statements including the company’s Income Statement, Balance Sheet, and Cash Flow Statement.  This data is presented only quarterly and updated regularly with every quarterly earnings report. On this tab, you can quickly see the important metrics such as the Total Revenue, EBITDA (earnings before interest tax depreciation and amortization), Total Assets, Total Debt, Stockholders’ Equity, Free Cash Flow, Operating Cash Flow, etc.  

Below the table, you will find four charts related to the company’s Earnings and Revenue History (Revenue, Earnings, Profit Margin), Debt to Assets ratio (Assets, Liabilities, Debt to Assets), Cash Flow (Operating, Investing, Financing), and quarterly Forecast EPS vs. Actual EPS (earnings per share) along with the Beat or Miss. This data can be viewed on both a quarterly and annual basis.  

Income Statement – An Income Statement (IS), also called the Profit and Loss Account, reveals a company’s financial performance during a specific period. The IS presents a breakdown of the Total Revenues and Costs of a company and shows how these line items ultimately convert into either Profit/Earnings or Loss for the company during the stated period.  

TipRanks presents the IS for three different periods namely, the TTM (trailing twelve months), Annually, and Quarterly. The TipRanks IS displays several line items including the Total Revenue, Gross Profit after deducting the cost of revenue, Operating Income, Pretax income, Net Income Available to Common Stockholders, Basic and Diluted EPS, Dividend per share, Basic and Diluted Shares outstanding, Total Expenses, EBIT (earnings before interest and tax), and EBITDA. Studying these data sets can help you understand how the company has managed its revenue and expenses and generated income for its shareholders.  

Additionally, you will see data for 6 historical periods, thus enabling appropriate comparison between the periods. By comparing, you can also see if a company’s financials are improving or deteriorating over time. That helps you make an apt and informed decision about whether or not to invest in the company.  

Below the IS table, you will find an Earnings and Revenue History graph that shows the historical Revenue, Earnings, and Profit Margin 

Balance Sheet – The Balance Sheet (BS) presents the as-on-date condition of a company’s assets and liabilities. TipRanks gives you a detailed break up of all the important line items of a balance sheet. These include Current Assets and Current Liabilities, Total Non-Current Assets and Total Non-Current Liabilities, Stockholder’s Equity, Current and Long-Term Debt, Total Capitalization, Cash & Cash Equivalents, etc.   

TipRanks displays both Quarterly and Annual Balance Sheets. It is important to note that a balance sheet will show you the financial position of a company on the date of reporting, as against during a period, as is the case with Income Statements. The amounts of assets and liabilities can change immediately on the following day. By studying the balance sheet, you can understand how well a company is capitalized and its liquidity position based on its current asset and liability position. Also, you will know if the company has enough cash to meet its daily outflows. The current assets and liabilities show you the short-term picture of the company while the long-term (non-current) assets and liabilities show you the long-term health of the company. Thus, studying the balance sheet of a company before investing in the stock can be beneficial in understanding its overall financial health. Finally, right below the table, you will find a graphical representation of the historical Assets, Liabilities, and Debt to Assets ratio of the company.  

Cash Flow – The Cash Flow Statement (CFS) presents where a company’s funds are coming from, where the funds are flowing to, and how the company is managing its operations. It is a statement to project what happened to a company’s cash position during a specific period. The statement is calculated by taking the difference between the relevant current and prior account balances from the balance sheet line items.  

Importantly, the cash flow statement is broken down into three parts as follows: 

  • Operating Cash Flow – cash flow from Operating Activities includes the regular inflow and outflow of cash from the general operations (purchase, sale, interest, salaries, etc.) of a business. It implies how much cash is generated from the company’s goods and services (operations).  
  • Investing Cash Flow – cash flow from Investing Activities includes the purchase and sale of both physical (machinery, real estate, etc.) and intangible (patents, copyrights, etc.) assets of a company by using the available cash and net debt.  
  • Financing Cash Flow – cash flow from Financing Activities includes the inflow and outflow of cash from both the debt (repayment of loans, etc.) and equity (dividends, stock repurchase, etc.) financing activities.   

By calculating these different cash flows, you arrive at the End Cash Position, which is the total of the above three mini-statements. By studying the individual mini-statements, you can understand where the company is losing money and in which activities it is making money.  

Finally, you will see the Free Cash Flow (FCF), which is the amount of cash left after paying all the business obligations, including operating expenses and capital expenditures, during a period. Investors and shareholders often study a company’s free cash flow to see if it has enough cash to pay dividends, repay debt, and engage in mergers & acquisitions (M&A). At the bottom of the page, you will see a graphical representation of the historical Cash Flow including the Operating, Investing, and Financing Cash Flows.  

How to Understand the “Earnings and Revenue History” Graph

The Earnings and Revenue History graph shows you the historical data of Revenue, Earnings, and Profit Margin for the last 10 quarters or the last six financial years. The graph is simple and easy to understand because it includes only 3 data points, which are projected through bar and line graphs.  

Revenue and Earnings are displayed on a bar graph, while the Profit Margin is displayed on a line graph. Studying the historical performance of these line items helps you to understand if the company’s revenues and earnings are growing or declining, and how the profit margins have changed over time.  

An increasing trend in revenue and earnings means the company is growing its business steadily. Also, an inclining trend in the profit margin line shows that the company is growing its profitability by managing its expenses efficiently. The opposite holds when the trend is in the downward direction, implying that the company may not be managing its business efficiently.  

How to Understand the “Debt to Assets” Graph

The Debt to Assets graph displays three data points: the company’s Total Assets, Total Liabilities, and Debt to Assets ratio. You can view the historical data of these three items for the last 10 quarters or the last six financial years. 

The Assets and Liabilities are displayed on a bar graph, while the ratio is displayed through a line graph. It is important to analyze the financial health of a company before making any investments. Studying this graph will help you to figure out if the company’s balance sheet size is growing or shrinking. This is especially important while studying sectors such as banks, since their deposit and loan balances play an important role in business functionality.   

Similarly, the trend of the Debt to Assets ratio will indicate whether the company’s debt proportion is growing against its asset base, which implies its liquidity position. If the company is short of liquidity, it will not be able to pay off its regular interest and principal repayments, thus running into default. Further, if the debt is indeed growing, it reflects poorly on the financials of the company unless the company has a specific agenda with the debt, for instance, to fund an acquisition or to fund an expansion. It’s a good idea to carefully study the trend demonstrated by these line items to gauge the company’s health and then make an informed investment decision.  

How to Understand the “Cash Flow” Graph

TipRanks plots the cash flows from Operating, Investing, and Financing activities on a line graph. You can view the historical data of these three items for the last 10 quarters or the last six financial years. By studying the trend in these items, you can understand how the company’s cash flows are impacted by each broad activity.  

In the case of Operating Cash Flows, an inclining trend indicates that the company is able to generate more cash from its regular business operations, which is a healthy sign. When the economy is in good shape, the company should be able to constantly grow its cash flows from operating activities, indicating an inclining trend in the graph. On the other hand, during tough times, the company’s cash flows from operating activities may show a declining trend. 

In the case of Investing Cash Flows, an increase may mean that the company is spending more on capital expenditure.  

In the case of Financing Cash Flows, an increasing trend may mean the company is raising more capital, either through debt or equity. In contrast, a declining trend may mean the company is utilizing more cash on activities such as repurchasing shares, dividend payments, loan repayments, etc.  

How to Understand the “Forecast EPS vs. Actual EPS” Graph

The Forecast EPS vs. Actual EPS graph displays a bubble chart comparing the forecasted earnings per share (EPS) vis-à-vis the actual EPS reported by the company. Plus, the chart shows whether the company has outpaced or missed the Forecasted EPS. The chart is displayed for the last six reported quarters.  

You can see three different colored bubbles on the chart: a gray bubble shows EPS Estimates, a blue bubble shows an estimate Beat, and a pink bubble shows an estimate Miss. By studying the chart, you can see whether the company has been constantly missing or beating analysts’ earnings expectations. A company that constantly beats expectations may be poised for favorable future growth, while a company that constantly misses expectations may be poised for a downward stock trajectory. Thus, by studying the chart you can make your investment decision between various comparable stocks.