Reading financial statements might seem daunting initially, but understanding a few key metrics can make it easier:
Income Statement Metrics
Gross Profit Margin: Indicates the percentage of revenue exceeding the cost of goods sold. Net Profit Margin: Shows the percentage of revenue that turns into profit after all expenses.
Balance Sheet Metrics
Current Ratio: Measures the company's ability to pay short-term obligations with its current assets. Debt to Equity Ratio: Indicates the proportion of equity and debt used to finance the company's assets.
Cash Flow Statement Metrics
Operating Cash Flow: Shows the cash generated from the business's core operations. Free Cash Flow: Indicates the cash available after accounting for capital expenditures.