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Guide to financial statements

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The guide to financials provide basic information on how to read financial statements in a company's annual report. It discusses key numbers in each of the statements common to all annual reports and offers suggestions from experienced investors on making sense of these numbers.

Like any new and complex subject, the language of financial statements may at first seen mysterious, even intimidating. This guide can help you begin to gain basic financial vocabulary and to understand the subject. Topics cover only the fundamentals of accounting and financial reporting and the guide and its glossary explain the terms and ideas you will need to understand these topics.

Resources: Overview

This section of the guide includes a small sampling of Internet links and other resources to help you extend your investment-related education. Use them as starting points for locating other materials.

Note: The following list is provided for the convenience of users and does not imply sponsorship or approval of any items. When you access a Web site on the list, you will open a new Web browser window. To easily reopen the guide anytime, add the guide home page as a bookmark on your personal menu of favorite topics.

Resources: Internet

Note: The following list is provided for the convenience of users and does not imply sponsorship or approval of any items. When you access a Web site on the list, you will open a new Web browser window. To easily reopen the guide anytime, add the guide home page as a bookmark on your personal menu of favorite topics.

Government agencies

The number of resources, of all types, on the Internet grows daily. You may find new Internet investment resources listed in your daily paper, in popular and special interest publications, at your online service provider's Web site, and at other Web sites (many of the following Web sites contain links to related Web sites). You can also use Internet search tools to locate other Web sites containing investment information.

The Securities and Exchange Commission is a regulatory agency that administers federal securities laws. These laws protect stockholders and ensure access to disclosure of all material information concerning publicly traded securities. The SEC also regulates brokerage firms, investment advisers, and investment companies.

The Department of Commerce promotes American businesses and trade, fosters economic growth, and helps create jobs. Two of its responsibilities that are frequently useful to investors are gathering and distributing statistical data, and measuring economic growth.

Investment and financial news

Financial news Web site focusing on business, world, technology, and sports. Links include markets, analysis, products and lifestyles. This Web site has member services and addresses the demand for investment performance through the combination of information and analyses. It delivers this information to corporations, issuers, financial intermediaries, and institutional investors.

A news, financial information, quotation, research, commentary, educational and investment planning service from Standard and Poor's Investment Advisory Services, Inc. ("SPIAS"). This Web site helps the individual investor track current investments, research potential ones, and provide information and insights from financial experts. Enables users to personalize the Web site and arrange news and insights that are particular to that user.

Breaking news releases from leading organizations and companies worldwide.

Provides top news, a market view, market winners, market losers, features and earnings reports to help the individual investor manage financial information.

From the editors of CNN and Money magazine. This Web site offers real-time quotes, archives of articles, letters, business headlines and a market watch section.

Online version of this business and investment magazine.

Your source for global business knowledge. The News/Periodicals - International Web page links to more than 70 online versions of international business publications, including Business Beijing (China), Central European Online, the London Financial Times, Nikkei Business Publications (Japan), Le Quotidien (Canada), and the Singapore Business Times.

Provider of financial data to the individual investor via the Internet. Links include stock quotes, support, a broker zone and more. The Web site also provides "Markets at a Glance" on the home page to allow users to see cross-market performance.

Online version.

Online version. To gain access to the Web site, you must take out a subscription.

Investment directories

Links to information on other business schools, business publications, careers on the Internet, reference Web sites, financial and economic data, companies on the Internet, and miscellaneous business topics.

Links to information on the markets, investing, companies, banking and finance, government, business news and directories, and miscellaneous topics. To gain access to the Web site, you must take out a free subscription.

Links to business libraries and to other Web sites that provide financial data, market news, and current quotes.

Links to data and information archives, news, economic and business publications, and other business and economic resources.

Investment education

An online bookstore that presents itself as the "Earth's biggest bookstore". The Web site's search feature allows you to search by title, author, and subject. A search for titles containing the words "financial statements" yields more than 1000 matches.

An independent, not-for-profit corporation to assist individuals in managing their investments. AAII offers investment information through publications, seminars, home study texts, educational videos, and local chapters.

Promotes itself as the market leader in investment club technologies.

Aims to educate, amuse and enrich the individual investor. Provides strategies, ideas and information, as well as the basic knowledge to put these things in context and allow individuals to begin making investment decisions.

A non-profit organization of investment clubs and individual investors. NAIC offers products, services, and professional support to help inexperienced and experienced investors become more informed. NAIC also publishes the monthly magazine, Better Investing.


Web site for a library of annual reports from national and international corporations, foundations, banks, mutual funds, and public institutions. Although full use of the services requires a paid membership, the Web site does offer some free information.

The Bureau of Labor Statistics collects and analyzes labor economics and statistics information for the U.S. Department of Labor and distributes the information to the public, Congress, other federal agencies, state and local governments, business, and labor. This Web site includes a link to "Economy at a Glance", a compilation of several economic indicators.

Index of Company overview. It offers IPO filings, quotes, latest news and search capability for corporate information, in addition to access to historical financials for over 8,000 companies. Personal subscriptions are available for individuals while special licensing is required for business purposes.

Online information for individual investors from Research:, a magazine for investment professionals. Many resources are free; others require a subscription.

Resources: Print and other


The following list provides a few examples of the many books on finance, investing, annual reports, and financial statements. You can search for additional titles using Internet resources such as This online bookstore's catalog includes all of the books listed below except "How to Read a Financial Report" from Merrill Lynch.

Budgeting & finance

Engel, Peter H. (First Books for Business Series). New York: McGraw-Hill. 1995. An illustrated introduction to business finance - cash flows, audits, balance sheets, and other key topics - that includes worksheets, checklists, case studies, and frequently asked questions.

How to profit from reading annual reports

Loth, Richard, B. Chicago: Dearborn Financial Publishing, Inc., 1993. Explains what to look for in the letter to stockholders, why the notes to financials are important, which words (and when they are used) are warning signs, and where to look for the overall financial health of a company.

How to read a financial report

Merrill Lynch, Pierce, Fenner & Smith, Inc. Fifth edition. Philadelphia: Merrill Lynch. 1984. A booklet for readers who find annual reports formidable reading. Using a fictitious company, the publisher walks through a balance sheet and income statement, explaining each, line item by line item.

How to read a financial report

Tracy, John A. Fourth edition. New York: John Wiley & Sons. 1993. Elements of financial statements and their inter-relationships explained, for users with no knowledge of accounting.

Keys to reading an annual report

Friedlob, George Thomas, Ph.D., CPA, and Welton, Ralph E., Ph.D. Second edition. New York: Barron's Educational Series. 1995. 54 keys explain laws, vocabulary, accounting procedures, financial analysis, reporting systems, and elements related to understanding and using financials and annual reports.

Understanding financial statements

Fraser, Lyn M. Fourth edition. Englewood Cliffs, NJ: Prentice Hall, 1995. Features cases based on actual published financial statements, self-tests with solutions included, and study questions and problems.

Magazines, newspapers, and other periodicals

Besides the publications listed below, many popular news magazines and daily papers carry regular stories on business, finance, and investment news. Check your local news stand and public library for other sources.
Note: Many of these publications also have online versions.




This Web site provides an extensive list of current business publications. You can search the list for specific titles, for publishing locations, and for journals with Web sites.

Miscellaneous publications

To identify sources of financial information useful in analyzing financial statements, refer to:

Radio and television

Check your local radio and television listings for availability and schedules of subject-related programs.

A business news radio program produced by KUSC at the University of Southern California, distributed by Public Radio International, and carried by many public radio stations.

Nightly business report

A business news television program carried by many Public Broadcasting System stations.

Wall Street Week with Louis Rukeyser

A weekly Public Broadcasting System television program featuring Louis Rukeyser discussing the economy and financial issues with various guest experts. You can search for information about this PBS program and others at