The massive amount of numbers in a company's financial statement can be bewildering and intimidating to many investors. On the other hand, if you know how to read them, the financial statements are a gold mine of information.
Financial statement analysis is the biggest part of fundamental analysis. Also known as quantitative analysis, it involves looking at historical performance data to estimate the future performance. Followers of quantitative analysis want as much data as they can find on revenue, expenses, assets, liabilities, and all the other financial aspects of a company. Fundamental analysts look at this information for insight into the performance of in the future. They don't ignore the company's stock price; they just avoid focusing exclusively on it.
Before we learn different ways to estimate future performance, it is important to understand the basics of the financial statements (both quarterly and annual reports).