How to Read a Financial Statement — Like You’re Peeling an Orange 🍊

Financial statements can seem intimidating — but once you understand how they work, they’re easier and juicier than they look.

They’re made up of three components: the balance sheet, the income statement, and the cash flow. You can think of reading a business like peeling an orange — each component helps you tell if it’s ripe, juicy, and sweet… and ultimately, that’s what you want to find out about the business.

🟠 Balance Sheet

The balance sheet shows a company’s health at a point in time. Like checking whether an orange is firm, heavy, and ready to eat.

🔹 Assets — What the company owns

Cash & Short-Term Investments: Cash, treasury bills, money market funds.

💡 More cash = heavier orange — feels ready to pick

Accounts Receivable: Money owed by customers.

💡 Steady receivables = no soft spots

Inventories: Physical goods for sale.

💡 No inventory? Some oranges grow differently — like software and that’s okay

Other Current Assets: Prepaid contracts, commissions, support services.

💡 Predictable assets = consistent growing conditions

🔸 Liabilities — What the company owes

Short-Term Debt: Loans due soon.

💡 Watch short-term debt — could be rot hiding under the skin

Accounts Payable: Unpaid vendor bills.

💡 Payables piling up? Could be smart harvesting… or stalling

🟧 Shareholder’s Equity — What’s left for the owners

Common Equity: Shareholder funding and retained earnings.

💡 Equity means the tree is growing strong — not propped up by fertilizer (debt)

🍊 Income Statement

The income statement tells you how much money the company made — and how efficient it was in doing so. Like checking whether the orange has enough juice or is it all dry inside.

Revenue: Total income from goods/services.

💡 The top line — more sales, more juice

Gross Profit: Revenue minus COGS.

💡 How juicy is the product?

Net Income: Final profit after all costs and taxes.

💡 The juice left for shareholders

🍯 Cash Flow Statement

The cash flow statement shows if the company’s juice is actually sweet — meaning, is it generating real cash?

Operating Cash Flow: Starts with net income, adjusts for non-cash items like stock comp and depreciation.

💡 Is the business turning profit into actual cash?

Investing Cash Flow: Buying or selling assets.

💡 Investing in future juice or cashing out

Financing Cash Flow: Raising or repaying capital (loans, stock, dividends).

💡 Is the company sharing the juice or bottling it up?

🍹 Final Sip

When you read financials like peeling an orange:

🟠 Balance Sheet: Is it ripe?
🍊 Income Statement: Is it juicy?
🍯 Cash Flow: Is it sweet?

These three layers help you understand how a company works, not just what it earns. If the balance sheet doesn’t look right, you can usually stop peeling. But if it holds up, and the income and cash flow check out too, you’ve found a juicy investment.

Yes, I really squeezed in all the puns I could.

Do the DD. Develop Different.

Disclaimer: This is not fiduciary advice. Please do your own due diligence and take full responsibility for your actions.