Lesson 2

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Lesson 2

Published on Nov 20, 2015

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PRESENTATION OUTLINE

Lesson 2

Financial Statements

How?

How do I know this is the right trade to make?

I know many of you are incredibly knowledgeable in the field of investing but there are probably some people going "How do I know stocks to invest in?" Some people like to read the news, some people like to use graphs and charts to predict the trend but I'm going to tell you about another handy method today.

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Financial Statements

Balance Sheets
Income Statements
Cash Flow Statements

Financial statements! These statements are thorough records that summarize a company's activities. They include three different sections as listed here. It is normally a pretty good idea to look over a company's financial position and long term value through using these as reference before making any trades.

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Untitled Slide

So to demonstrate the difference in all of these records I'll be making a small diagram for you guys. First we have balance sheets that only show a company's position at a certain point in time (draw two axis, draw point).

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Assets = Liabilities + Equity

Assets = Value of Company
Liabilities = Debt of Company
Equity = Remaining Assets after paying off liabilities

There are then three main components of a balance sheet. First off assets, this section shows the things a company owns and controls to receive economical benefits from. It similar to showing all the values of a company. So the last two are tied together, liabilities and equity. Liabilities are obligations that a business may owe or settlements that include the transfer of cash and other resources. On the other hand, equity is what is left of the assets after paying off debts. The portion of the company that is owed to shareholders through dividends. This equation is always true for a balance sheet.

Income Statements

This is the report that includes the income, expenses, and the resulting profit or lose earned during a period of time. (Draw two points and connect with a line)

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