How to Actually Read Financial Statements Like a Pro

Earnings season = financial statements everywhere. But let’s be real—most people have no idea what they’re looking at.

Here’s the quick version:

Income Statement (P&L): Revenue - Expenses = Net Income. Simple. If it’s negative, the company bled money that quarter.

Balance Sheet: What the company owns (Assets) - What it owes (Liabilities) = Shareholder Equity. It’s literally a wealth snapshot.

Cash Flow Statement: Where’s the cash actually moving? Three buckets:

• Operating (day-to-day business) → should be positive
• Investing (big purchases like new factories)
• Financing (debt, dividends, buybacks)

Real talk: A positive income statement can hide cash problems. A negative cash flow from operations? That’s a red flag even if profits look good.

Apple’s a textbook example—generated $26.5B free cash flow with 60% YoY growth in its latest report. That’s why it’s the “cash king.” Not flashy, but sustainable.

The trick isn’t memorizing every line. Just focus on the 3-4 numbers that tell the actual story. Everything else is noise.