Investment you must know #1 |Financial Statement Analysis Introduction|Crash Course ACC101(Beginner)

[Music] [Music] hello everyone welcome to my channel today we start talking about the first series of financial literacy course financial airlines fundamentals series the series contains about 40 issues in this part we will explain how to deal with the company's financial status and the overall framework and the method of financial statement analysis what are the subjects in the financial statements how do you say calculate which subject in general financial statement what models can be used to analyze the report of listed companies the what ratios can be used to introduce the company's experience i will summarize and introduce those contents in our basic course series we introduce some more basic contents in the basic of financial evidence we are mainly divided into five aspects to expand so first of all we will explain how to analyze the three core statements of the companies in the first three aspects what is the income statement then the balance sheet and finally we will talk about the cash flow set so why put the income statement first we all know that the core indicators that determine the stock price of the listed company company's company's performance to be prison that is the profit of our company this year what is my profitability we can get this information by analyzing the company's income statement we need to know that the income statement reflects the number of periods in the company over a period of time it's a council of a period number for example how much revenue did our company earn in the whole years of 2019 what is the profit of the company if the company's income is higher and the profit is higher does mean that our company's profitability is stronger and the company's performance is better generally the company's stock price will be more stable so we talk about the income statement first after the income statement is finished we will expand the balance sheet the benefit is quite different from the income statement because it reflects a time point of our company most of the balance sheets are announced at the end of the year or at the end of the quarter for example in the end of the 2019 we can see how many assets i have in this company how much debt how much shareholder equity does it have the balance sheet is one with the most subject and the most complex contents in all three statements basically the more complex calculation subjects designed in finance are all in the balance sheet for example inventory calculation depreciations of fixed assets amortization of intangible assets and many many things these things are all in the battle street we'll expand in the detail later and sometimes the balance sheets can also tell us the financial status of the companies as a whole at this point in this year for example how much money does my company has with other companies how much do i own assets how much do i just own me how many products and inventories of our company have not yet sold how big is my company answers how many fixed resident tangible assets i have so all of this we put them all in the benefits of explanations therefore by analyzing the income statement and the balance sheets together we can have a macroscopic understanding of the overall financial status of the target company the income statement reflects my performance over a period of time the balance sheets reflect my financial situation at a certain point in time so why should we add a cash flow segment based on this new statement the reason is that both the income statement and the balance sheet are based on an accounting method called the acronym basis to make a record then let's take a look at the concept of a pro the accrual basis refers to when i reconfirm and counting subjects for example when i confirm an incomes or when i confirm the cost then the basis of my confirmations has nothing to do with whether i receive cash or not right the 19 wizard transaction is actually confronting commercial terms for example i sold a batch of booze to my customers then the contract has been signed i have sent a good to him i also issued him the invoice well in this case even if i haven't received the cash he paid to me i should still confirm this income this is called a coral system in other words the monthly confirmed science depends based on the actual completion of transaction and has nothing to do with whether i receive cash or not now we know that both the income statement and the benefits are looks on an accurate basis the accrual system has many advantages it can most truly reflect the experience of our company in their years that is tuesday i analyze it from the perspective of business substance how much revenue has the company achieved how much did this cost these are the advantages of the current basis but it also has these advantages the biggest shortcoming of the core system is that it may cause my book incomes and profits to be separate from the company's cash flows for example the most typical situations is that my company sold out a lot of things that years i sold a lot of goods then i confirmed a lot of income right a lot of profits were also confirmed but my client has not paid me cash uh for a long time he didn't pay the money to me then the company's situations at this time is that although the book revenues and profits are a lot but our company's cash is insufficient if you want to continue operating the companies you must have cash right because of above situations i cannot maintain the company's operations for example in my company i need to pay my employees i need to pay a lot of daily office expenses i need to purchase my raw materials it's impossible for me to tell my employees and suppliers that i use my company's profits and statements to buy things or pay wages this is impossible or it's ridiculous the income of profit is just a number and if i want to keep a company in status of daily operations i need to pay a lot of real cash every day so this is the biggest problem with a core system so we just judge your companies and then show status based on the income statement and the balance sheet if i only refer to the balance sheet and income statement it may make me look like the companies has a lot of incomes a lot of profits and a lot of assets on its statements but the company's actual cash is insufficient and this time the company's continuous operations may be affected so we want to make up for this shortcoming we want to introduce the company's third report called a cash flow statement then the biggest difference among the cash flow statements the income statement the balance sheet statement is that it's not based on the accrual basis it is based on the received and payment realization systems or cash basis the cash basis means that the book is completely based on cash while i receive a sum of money i record an income when i pay a sum of cash i record an expenditure in this way we can accurately see how much cash the company had in the years from the cash flow statements per year if the cashier received this year is significantly higher than the cash i paid this years this shows that the complex cash inflows that in that years was a net inflow in this case a company's liquidities or cash on its book is relatively high there is no problems with the company's future continuous operations if a company has high book incomes high profits and high asset values but the cash flow of our company that years was a net outgrow for example the cash received by this company is far less than the cash paid then in this case the company's ability to continue operations may be problematic in summary the cash flow statement can be supplements the lack of information in the income statement and managed like the income statements the number of the cash flow statement is also a period of numbers it reflects the inflow and outflow of cash in our companies over a period of time for example how much cash our company received in 2019 how much cash did my company paid in total when the course specifically talks about the cash flow statement we will focus on the content insight so in our financial classroom financial statement analysis we will spend a lot of time in the first three part to talk about the financial statement we will focus on an analysis of the three core statements of the companies including the structure of the report the course objects and how much subjects is calculated these skills are the basic knowledge you need to use when we can analyze the actual report of listed companies for example when we get the annual report of these two company you need to look at the number of the report and understand what each number represents which is what each subject represents and know how each subject is calculated then after we understand the strategies we can start to analyze the company's report in very accessible way i will add two more contents after three reports in part four we talk about the evidence of the core subject of financial statement this part of the contents will meaning focus on the balance sheet because the balance sheet has a lot of content and the content calculation is relatively complicated so we have a reinforcement learning for this part separately for example it includes account receivable and payable inventory fixed asset and so on these contents will be expanding and expanding in the fourth part of this course then in the last part we will introduce uh what methods and ideally models are used to analyze financial statements this is core part of our curriculum because our course is about how to analyze the report of each listings company in practice and make decisions based on analyst results and this can help us spend our investment portfolio rationally so in the next lessons we will start with income statements if you want to receive course information in times without missing course updates please don't forget to subscribe my channel if you have any questions please leave a message 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