But by the time one of these parties get involved, it's a very public issue, the stock price drops and you're in bad shape if you're an investor or employee of the company. So in the end, the only party that's really going to look out for your interest in terms of understanding and trusting financial statements is you. Which is why it is really important that you learn some basics in terms of reading financial statements.
9:54
So what are the required financial statements? Well, there's four of them. First, there's a balance sheet, which gives a company's financial position, which is its listing of all its resources and obligations on a specific date.
10:07
Then there's the income statement, which provides the results of operations over a period of time using accrual accounting. By over a period of time we mean between two balance sheets, so either a quarter or a year. And by accrual accounting, it means we're going to recognize things in the income statement based on business activities, not based on cash flows. Because we have a separate statement for cash flows, the statement of cash flows, which will give you all the sources and uses of cash over a period of time. And then finally, there's the statement of stockholder's equity, which provides changes in stockholder's equity over a period of time.
10:42
>> Okay. Could we get an example? This is pretty abstract.
10:49
>> Yes, in fact I have an extended example where we go through a simple business and see what the different financial statements can tell us about what's going on at the business. But it takes another ten minutes or so, so to avoid this being a long first video, why don't we cut it off here and we'll pick it up in the next video. I'll see you then. >> See you next video.