Reading a company's financials

A company reports three statements: the profit & loss (did it make money?), the balance sheet (what does it own and owe?) and the cash-flow statement (did profit turn into cash?). Here is what to look for in each.

Updated 9 September 2026

Every listed company files results each quarter and a full annual report. Three statements do most of the work. You do not need to be an accountant — a few simple checks catch most problems.

1. Profit & loss (income statement)

Top to bottom, it shows how revenue becomes profit:

Revenue / sales — money earned from the core business. Look at the trend over 3–5 years, not one year.
Operating profit and operating margin (OPM %) — profit from operations before interest and tax, and that as a % of revenue. A stable or rising margin is a good sign; a falling one needs explaining.
Net profit — the bottom line, after interest, tax and one-off items. Check whether a big jump or fall came from a one-time item.
EPS — net profit per share. This is what P/E uses.

2. Balance sheet

A snapshot on one date of what the company owns and owes:

Debt — borrowings. Compare it to operating profit: can the company comfortably service its interest? Rising debt with flat profit is a warning.
Equity / net worth — the shareholders’ stake. Book value per share = net worth ÷ shares.
Working capital — money tied up in inventory and unpaid customer bills. If receivables grow much faster than sales, profits may not be turning into cash.

3. Cash-flow statement

The most honest of the three, because cash is harder to massage than accounting profit. The key line is cash flow from operations. Over a few years it should track net profit reasonably closely. A company that reports profits every year but never generates operating cash deserves scepticism.

A quick 6-point check

Is revenue growing over 3–5 years?
Is the operating margin stable or improving?
Is net profit growing without relying on one-off items?
Is debt manageable versus operating profit?
Does operating cash flow roughly follow reported profit?
Are promoter shares pledged (borrowed against)? A high pledge is a red flag.

Return ratios

ROE (return on equity) and ROCE (return on capital employed) measure how much profit the company generates on the money invested in it. Consistently high figures (say 15%+ ROCE) across a cycle usually indicate a strong business; they do not tell you whether the share is priced attractively.

Where to find this

Platform shows a summary of revenue, profit, margin and shareholding on each stock page, drawn from third-party data and labelled with its source and date. Always read the company’s own annual report and results filing for the full picture before acting.