I've just noticed that many people still don't quite understand financial statements, even though they are a fundamental basis for investing. So I want to share this knowledge so everyone can understand what exactly financial statements include and how we should read them.

When thinking about investing nowadays, actual factual data is much more important than listening to anyone's opinions or even looking at technical charts. Financial statements are the real numbers that tell us what the company has done, how much profit it has made, and how much cash is left. They reveal stories that are more important than feelings or anyone's guesses.

Generally, financial statements are documents that summarize a company's financial information. They help us see the true financial picture of how strong the company is, whether it makes a profit, how much debt it has. They are tools used for decision-making regarding investments, lending, or managing the company's finances.

They consist of three main parts that you need to know: First is the income statement, which shows how much revenue the company has, how much expenses, and ultimately how much profit or loss during a specific period. Second is the balance sheet, which shows an overview of assets, liabilities, and equity at a specific date, such as year-end. Third is the cash flow statement, which shows how cash flows in and out of the company and from which activities.

Once we understand what is included in financial statements, the next step is to learn how to read them. The income statement is a crucial part that tells us about the financial impact on the company. It’s not just net profit but also includes changes in asset values based on market prices.

When reading financial statements, we should ask ourselves whether revenue is growing, whether expenses are problematic, how well the company controls costs, and what EBITDA is (which is earnings before interest, taxes, depreciation, and amortization). These figures tell us the real story of the company.

The advantage of reading financial statements is that we can assess the financial position, understand whether the company can pay its debts, and plan investments reasonably. The downside is that sometimes the data is complex, numbers may not always be accurate, and they only show figures, not the whole story.

For those who want to start investing in foreign stocks, understanding financial statements is an important first step. After that, you can use this information to decide whether to invest directly or through CFDs, each with its own pros and cons.

In summary, if you are serious about investing, you need to spend time learning how to read financial statements because they are the language companies use to communicate with investors, and they will help you make better decisions in the future.