The tool that is at the heart of all fundamental analysis is financial statements. Financial statements serve as the best proxy for determining a company's performance and financial health. The three statements that are most analyzed are the balance sheet, income statement and statement of cash flows. Each statement is equally important and should be analyzed for each quarter that the company issues financial reports.
Financial statements can also include statement of retained earnings and pro forma statements.
Most financial statements will include notes and disclosures that should also be evaluated carefully. It should be noted that most transactions are recorded at historical cost. This means that buildings or other assets that have appreciated in value will not be reflected as so on the balance sheet. For any terms that you do not understand the meaning of, go to the glossary section of this site. The balance sheet provides a snapshot of a company's financial position at a certain point in time.