Basic Financial Statements
For young women interested in entrepreneurship or investing, understanding basic financial statements is like learning to read a company's financial story. These documents provide crucial insights into how a business is performing.
Key Concepts
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Financial Statements: Formal records of the financial activities and position of a business.
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Income Statement (Profit & Loss Statement): Shows a company's revenues and expenses over a period (e.g., quarter, year) to calculate net profit or loss.
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Revenue: Money a company earns from sales.
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Expenses: Costs incurred to generate revenue.
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Net Income (Profit/Loss): Revenue minus expenses.
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Balance Sheet: A snapshot of a company's financial position at a specific point in time. It shows what a company owns, owes, and the ownership stake.
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Assets: What a company owns (e.g., cash, property, equipment).
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Liabilities: What a company owes (e.g., loans, accounts payable).
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Equity: The owners' stake in the company (Assets - Liabilities = Equity).
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Cash Flow Statement: Shows how cash is generated and used by a company over a period, categorized into operating, investing, and financing activities.
How to:
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Stocks: Represent ownership in a company.
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Bonds: Lending money to a company or government in exchange for interest payments.
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Mutual Funds: A collection of stocks, bonds, or other securities managed by a professional.
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ETFs (Exchange-Traded Funds): Similar to mutual funds, but traded like stocks.
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Savings Accounts (for short-term goals): While not truly "investing," they are a safe place to hold money.