This booklet for trustees of higher education institutions offers guidelines to help trustees understand the institution's financial statements. Individual sections describe the three major financial statements and cover topics such as: (1) standards of the Financial Accounting Standards Board; (2) the "statement of financial position," which summarizes assets, liabilities, and net assets; (3) the key strategic issue for trustees in evaluating the statement of financial position, which is determining whether existing resources will enable the institution to fulfill its mission; (4) the "statement of activities," which reviews changes in the institution's net worth; (5) the key strategic issue for trustees in evaluating the statement of activities, which is how effectively did the institution use its resources to provide services to its constituents; (6) the "statement of cash flow," which assesses the institution's ability to meet ongoing cash needs; and (7) the key strategic issue for trustees in evaluating the statement of cash flow, which is determining the institution's sources and uses of cash; and (8) assessing the external market in order to understand who is the audience for the institution's financial statements and what are its information needs. Examples of the three statements for a hypothetical institution are provided. (DB)