Companies update the market on their performance during reporting season, through balance sheets and profit and loss statements.

Listed companies post their half-year and full-year financial reports on the ASX's announcements page.

Understanding how these reports work, can help you make informed investment decisions.

Balance Sheet

A balance sheet outlines a company's assets, liabilities and its' shareholder's equity.

The formula used for the balance sheet is :

Assets= liabilities + shareholder's equity (money invested by shareholders plus retained earnings after debts)

Current assets are those that will be converted to cash within a year and current liabilities are those due for payment within a year.

There is a separate section for more detailed explanations of the line items.

The Profit and Loss Statement

Also called an income statement or statement of financial performance, this report measures how the company earns its revenues and incurs its expenses during a specific period, as well as showing the net profit and/or loss.

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