How to read a PSX company's financial statements
The income statement, balance sheet and cash flow statement explained: what each one tells you and the numbers worth checking first.
PakStockLab Team
2 Oct 2026 · 2 min read
Every company listed on the Pakistan Stock Exchange publishes quarterly and annual accounts. They can look intimidating, but you only need to understand three statements, and how they connect, to judge most businesses.
1. The income statement: is the company profitable?
Also called the profit and loss account, it covers a period such as a quarter or a year. It starts with revenue (sales), subtracts the cost of sales to give gross profit, deducts operating expenses to reach operating profit, then accounts for finance costs and tax to arrive at net profit.
- Revenue growth: are sales rising year after year, or only because of inflation?
- Gross and net margins: are they stable or improving compared with peers?
- Finance cost: a large interest bill can wipe out operating profit when interest rates rise.
- Earnings per share (EPS): net profit divided by shares outstanding, the basis of the P/E ratio.
2. The balance sheet: what does it own and owe?
The balance sheet (statement of financial position) is a snapshot on a single date. It lists assets (what the company owns), liabilities (what it owes) and shareholders' equity (the difference). It always balances:
The accounting equation
Assets = Liabilities + Shareholders' equity
- Debt-to-equity: how much of the business is funded by borrowing.
- Current ratio: current assets divided by current liabilities, a quick check on short-term liquidity.
- Growing receivables or inventory faster than sales can be an early warning sign.
3. The cash flow statement: is the profit real?
Profit is an accounting measure, but cash pays dividends and debts. The cash flow statement splits cash movements into operating, investing and financing activities. Over several years, a healthy company's cash from operations should broadly track its net profit.
Free cash flow
Cash from operations − Capital expenditure
Red flag
If a company reports rising profits but its operating cash flow is persistently negative, find out why before investing. It can mean profits are tied up in unpaid receivables or unsold stock.
Where to find the accounts
Listed companies publish their financial statements on their own websites and file them with PSX, where announcements are available on the exchange's data portal. Read the directors' report and auditor's report too: a qualified audit opinion or an 'emphasis of matter' paragraph deserves your attention.
On PakStockLab, each company profile summarises key figures and ratios across periods, so you can spot trends quickly and then read the full report for context.
This article is for general education only and is not investment advice. See our Terms of Service.