Step-by-step
- Read the income statement for revenue, margins, and profit.
- Review EPS and compare it with previous periods.
- Check debt, equity, and book value on the balance sheet.
- Look at cash flow to see whether profit is backed by cash.
- Connect numbers to dividends, announcements, and sector context.
Worked example
A company can report higher profit but weaker cash flow. That difference should be understood before drawing conclusions.