Why we read three statements, not one
Every listed company publishes three financial statements every quarter. Most retail investors read only the first - the Profit & Loss, because it has the "did we make money?" number. That's a mistake.
The three statements tell three different stories. Reading only one is like watching only one camera angle of a car crash and deciding whose fault it was.
Each statement, in one line
| Statement | Answers | When it lies |
|---|---|---|
| Profit & Loss (P&L) | Did we earn a profit on paper? | Yes - accounting can be aggressive |
| Balance Sheet | What do we own and owe right now? | Sometimes - asset values can be stale |
| Cash Flow | Did real cash actually come in? | Rarely - cash is cash |
Why we always read all three together
Take a hypothetical company:
- P&L says: revenue ₹500 cr, profit ₹100 cr.
- Balance Sheet says: receivables (money owed by customers) up from ₹100 cr to ₹250 cr.
- Cash Flow says: operating cash inflow only ₹20 cr.