Financial statements are like a company's medical report, which can be analyzed from the data to see whether the company's financial position is healthy, whether its earnings performance continues to grow, what the size of its assets is, changes in the flow of cash, and so on.。

What are Financial Statements？

Financial Statements (Financial Statements), referred to as financial statements, mainly record the financial performance of a listed company over a specific period of time in the past, such as earnings performance, how much cash it holds, total assets and liabilities, etc.。If an investor wants to invest in a company, he or she must first study whether the company has long-term and sustained profitability by reading the financial results.。

Generally speaking, if the earnings numbers indicate that the company is doing well, it will attract many investors to buy the company's shares and the share price will rise; conversely, the share price will fall.

Quarterly Report

Quarterly Report (Quarterly Report), the main record of the company's financial performance every three months。In general, the content of quarterly reports is a short summary of the data, as only one quarter's financial performance is recorded, and the performance explanation component is relatively small compared to the annual report.。

Bursa Malaysia requires listed companies to publish results within 2 months of the end of the closing date of each quarter.。For example, the quarterly closing date is June 30 and the quarterly report is published by August 31 at the latest.。

In the U.S. stock market, the U.S. Securities and Exchange Commission (SEC) requires U.S. public companies to publish quarterly reports within 45 days of the end of each quarter's closing date.。For example, the quarterly closing date is September 30, and the quarterly report needs to be published before November 14 (within 45 days), subject to the actual announcement date of the listed company.。

Annual Report

Annual Report (Annual Report), referred to as the annual report, mainly records the company's financial performance every 12 months.。Early annual reports were mostly in the form of physical books and magazines, mailed to shareholders.。With the development of technology and securities networking, many listed companies will publish their annual reports in the form of electronic documents on the official website, allowing the public to download their own。

Compared to the simplicity and directness of the quarterly report, the annual report details the company's performance over the past fiscal year。In addition to earnings, assets, liabilities, cash flow and other data, the company's management will publish the current year's performance summary, development strategy, outlook for the future, business potential risks and so on.。Investors can use the annual report to understand the actual operation of the company, assess the competitive advantage and real value.。

Under exchange regulations, Malaysian listed companies are required to report their full-year results within four months of the fiscal year closing date.。For example, the annual closing date is June 30 and the annual report is published by October 31 at the latest; the annual closing date is December 31 and the annual report is published by April 30 at the latest.。

In the U.S. stock market, U.S. listed companies are required to report their full-year results within 60 to 90 days of the fiscal year closing date.。Based on the difference in the closing date, an annual report is released almost every month.。However, U.S. stocks have a so-called "super earnings season," with most large companies choosing to report results in January, April, July and October each year, creating a peak earnings season.。

Earnings Accounting Standards: GAAP vs IFRS

In order to ensure that the financial statements disclose sufficient and useful information, listed companies prepare their financial statements in accordance with accounting standards.。Different countries adopt different accounting standards, even the format and presentation of financial statements vary。It can be broadly divided into two main categories: IFRS IFRS, which applies to 120 countries around the world, and US GAAP US GAAP, which applies to US public companies.。

GAAP and IFRS are two different accounting standards。The two have their own bookkeeping standards, and different standards can affect the overall performance of financial reports, which in turn can lead investors to misunderstand the value of the company, and the two approaches differ in three ways.

inventory recording method

There are two main types of inventory recording methods: First In First Out (FIFO) and Last In First Out (LIFO).。

First-in, first-out (FIFO) refers to the priority of selling the earliest purchased goods.。For example, the company buys new goods in June, July, and August for $100, $120, and $160, respectively。When a company needs to sell goods in August, it must give priority to selling the first goods purchased, i.e., the goods purchased in June for $100。

FIFO is a common inventory recording method that complies with GAAP and IFRS accounting standards。The advantage of FIFO is that inventory prices are closer to market prices and the company cannot adjust prices on its own, which helps investors better grasp the value of the company.。The disadvantage is that when prices rise, there will be a huge increase in profits, which in turn increases the company's tax problems.。

The last-in, first-out (LIFO) method is the opposite of FIFO, which refers to the preferential sale of newly purchased goods.。For example, companies individually buy new goods in June, July, and August for $100, $120, and $160.。When a company needs to sell goods in August, it must give priority to selling the most recently purchased goods, i.e., goods purchased in August for $160。

The LIFO inventory recording method only complies with GAAP accounting standards.。The advantage of using LIFO is that when prices rise, there will be a higher cost of sales and a lower inventory balance, so the tax amount will be relatively reduced。When tax costs are reduced, it will allow the company to have better earnings performance, more revenue, and allow the company to continue to grow。

Value revaluation

Under IFRS, a company's inventory, property, plant and equipment, intangible assets and portfolio investments are allowed to be revalued。However, under the GAAP system, revaluation is not allowed。

If the company's value can be revalued, it will help investors determine whether the company's value will increase or depreciate.。If the company is unable to revalue, investors will not be able to obtain the latest value.。For example, a piece of land is worth $100,000 and five years later is worth $500,000.。If the company uses IFRS, it can record the revaluation value after 5 years ($500,000), while GAAP cannot revalue, so only the original value ($100,000) can be recorded.。

Depreciation of assets

GAAP requires illiquid assets, such as buildings, vehicles, machinery, etc., to be valued at historical cost and appropriately depreciated。Suppose a company buys $50,000 worth of machinery in 2011, and in 2021, the company is required to depreciate the machine at the price it bought at the time ($50,000).。

IFRS allows illiquid assets to be depreciated at initial cost or current market prices.。Suppose a company buys a $50,000 machine in 2011 and the market price in 2021 is 5.$50,000, the company can choose to use the initial cost price ($50,000) or the current market price (5.$50,000) to compute depreciation of the machine。

Depreciation is an expense。If a company uses IFRS guidelines to depreciate using current market prices, it will result in increased company expenses。continued the example of IFRS, corporate machines rose from $50,000 to 5.$50,000, which adds $5,000 to the company's depreciation expense at the same time.。If GAAP is used, the Company will not face an increase in depreciation expense due to asset appreciation。Based on the "Revenue - Cost - Expenses = Earnings" framework, when expenses increase, they lead to a decrease in earnings.

three major financial statements

Income statement: the company's profit and loss at a glance

Income Statement (Income Statement) is a report card of the company's profit and loss performance, which mainly records the profit and loss performance generated by the company's trading transactions.。Want to know whether the company is making or losing money, whether its performance is good or bad compared to the previous accounting period, can be observed through the income statement。

The income statement not only shows the company's current revenue, expenses, net profit after tax, etc., but also shows the company's earnings structure, such as gross profit (Gross Profit) and operating profit (Operating Profit), which represents the revenue earned by the industry, and can help investors understand the company's ability to make money through its (core business)。

1.Operating income (Net Sales)

Operating income is the income earned by an enterprise from the sale of goods and services.。Years ended refers to the end date of the company's fiscal year, which facilitates investors to compare historical performance and make judgments.。

2.Gross profit (Gross Margin)

Gross margin is the profit figure obtained by a company after deducting operating expenses (e.g., cost of sales, operating expenses and expenses).。

Running a business requires cost operations, such as purchase costs, transportation services, etc., which need to be recorded in the income statement。After deducting these costs from turnover, you can get a picture of what the company's gross profit is.。

3.Operating costs

Operating costs refer to the funds used by the company in the process of development, such as research and development expenses, marketing expenses, administrative expenses, rent, utilities, etc., which are deducted from the income statement to calculate net profit.。

4.Net Income (Net Income)

Net income (also known as net profit) is the profit earned after the company pays the tax.。Every company is obliged to pay taxes to the state, after deducting the tax, you can get the company is in a net profit or net loss.。

Balance Sheet: Analyzing Assets and Liabilities

Balance Sheet (Balance Sheet) mainly records how many assets and liabilities are held from the company's inception to the latest settlement date, such as how much plant, machinery, transportation, cash, loans, equity, etc.。Therefore, the balance sheet will specifically indicate the latest settlement date as of (as at)。

The balance sheet is divided into three main parts: total assets (Total Assets), total liabilities (Total Liabilities), and shareholders' equity (Shareholder's Equity).。It is structured as follows: assets = liabilities + shareholders' equity

• Assets (Assets)

Assets can be divided into liquid assets and illiquid assets.。

Current assets (Current assets) are assets that can be turned into ready cash in a short period of time (1 year).。Liquid assets include trade and other receivable (Trade and other receivable), inventory (Inventories), cash and cash equivalents (Cash and cash equivalents), marketable securities (Marketable securities), etc.。

Non-current assets are assets that take longer (1 year or more) to realize.。Illiquid assets include industry, machinery and equipment (Property, plant and equipment), marketable securities (Marketable securities), etc.。

• Liabilities (Liabilities)

Liabilities can be divided into liquid and illiquid liabilities.。

Current liabilities (Current liabilities) are liabilities that can be repaid in a short period of time (within 1 year).。Common liquid liabilities include trade and other payables (Trade and other payables), short-term borrowings (Borrowings), term debt (Term debt), etc.。

Non-current liabilities (Non-current liabilities) are debts that take longer (1 year or more) to repay.。Common illiquid liabilities include long-term borrowings (Borrowings), term debt (Term debt), long-term lease liabilities (Lease liabilities), and deferred tax liabilities (Deferred tax liabilities).。

• Shareholders Equity (Shareholder's Equity)

Shareholders' equity is the net value of the company's total assets minus total liabilities and the true value of the company's assets.。If the company has less assets than liabilities, it will face insolvency and the company will not be able to use its assets to repay its debts。Companies can also go into financial crisis or even fail at any time due to excessive borrowing.。

Cash Flow Statement: Understanding Cash Flow

Cash Flow Statement (Cash Flow Statement) mainly records the company's cash expenses and income.。

However, not all buying and selling transactions are in cash。Some customers will credit their accounts and pay them off later.。Generally, these transactions are recorded in the turnover of the income statement.。If the customer is unable to repay the arrears resulting in a loss to the company, it will be classified as a bad debt and deducted from turnover.。

Since the cash flow statement records cash in and out, the amount of cash will affect whether the company has enough money to expand its business or survive a financial crisis.。Therefore, investors will pay more attention to the cash flow statement data than the income statement, which will help investors grasp the company's cash position.。

The cash flow statement is divided into three main parts: Cash Flows From Operating Activities, Cash Flows From Investing Activities, and Cash Flows From Financing Activities.。

• Cash Flows from Operating Activities

Primarily records cash inflows or outflows from all operating activities, including profits, revaluation of intangible assets, depreciation, purchase and sale of goods, interest expense, etc.。

• Cash Flows from Investing Activities

The main record of the company's purchase or sale of land, machinery and equipment, plant and other assets of the income or expenditure of cash flow.。The purchase of assets generates cash outflows from investing activities, while the sale of assets generates cash inflows.。It is worth noting that although the purchase of assets (such as machinery and equipment) will lead to a reduction in cash flow, the company spends this money to help improve the quantity and quality of the company's products, with the opportunity to exchange for greater returns in the future.。So investing cash outflows is not necessarily a bad thing.。

3.Cash Flows from Financing Activities

The main record of the company's access to funds from financial institutions (i.e., financing loans) and the cash flow of debt repayments。It should be noted that when this cash flow is positive, it means that there is a lot of money flowing into the company; conversely, a negative value means that the company is spending money。