Growth Potential

The biggest thing investors tend to look for in a financial statement is any indication of the company’s ability to grow or anything that might prevent it from growing. Since investors will buy stock and become partial owners, they want to know the likelihood that the business will grow in value, allowing them to sell their shares in the future for a higher price. Income statements show how much the company is currently making, so investors look for an income that is sufficient but not so high that it will be impossible to increase in the future.

Cash Flow

Cash flow refers to the rates at which a business takes in revenue and pays out cash. Investors will examine financial statements, known as cash flow statements, to learn about a company’s cash blow balance, or lack thereof. Cash flow statements also include information about the business’ investments and how much they pay in interest. This is useful for predicting the future cash flow, which will affect how fast the company can grow.

References

Resources

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