Personally, I think it is very important to evaluate the company’s financial statement before

investing. Because we have to see the financial status of the company and judge how the
company is up and running, how the company acquiring and managing funds. Before we
invest, we have to see how the performance of the company goes, it can be seen on financial
statement. We also can see how the company will develop our investment fund to be used as
profit for us and guess how high would the profit be. So we have to really careful and paying
lots of attention to the numbers contained in that firm’s financial statements. If the financial
statement of the company is good and went well, it means that the company could convince
us for making highest profits and they were be able to achieve goals well. When evaluating
its financial statement, we also can see the company’s ability to pay its debts. So, all of the
list/number on financial statement can shows us the real goals and the achievements of the
company in the short or long term and it can convince us where the investment funds will be
developed.

The key information from the firm’s financial statement are the balance sheet, the Income
Statement, the Statement of Shareholders' Equity, and the Statement of Cash Flows. But to
evaluate the financial strength and operational efficiency of an entity for the most important
parts can be seen from the balance sheet and income statement. It can be seen in the balance
sheet because it gives the information to predict the amount of future cash flows. We can see
the liquidity, solvency and financial flexibility before we invest to that firm. We can see the
company's financial flexibility and the company's ability to pay debts when the debt matures.
Besides that, with firm’s income statement we can determine the profitability and the
investment value. It also helps us as an investor to evaluating company performance and help
assess the risk or uncertainty of achieving future cash flows (determined by its components:
income, expenses, gains and losses). Other than that things that we must pay attention to are
the current ratio, debt to equity ratio, quick ratio, total debt to total asset, net profit margin,
operating profit margin, return on asset (ROA), return on equity (ROE), asset turnover,
inventory turnover, receivable turnover, earning per share (EPS), account payable turnover,
book value, Price Earning Ratio (PER), and Price to Book Value (PBV).

Link referensi

- https://accounting.binus.ac.id/2015/10/09/mengenal-laporan-laba-rugi-income-
statement/
- https://accounting.binus.ac.id/2015/10/09/mengenal-neraca-saldo-balance-sheet/