Financial Statement Analysis
Helping You with Financial Statement Analysis
Accounting is the language of business and to become a successful investor, you also have to think like a businessman.
Warren Buffett said that
“I am a better investor because I am a businessman and a better businessman because I am an investor.”
In other words, business and investing is so closely intertwined that you can not separate it. In order to be a great investor, understanding accounting and performing financial statement analysis is a top priority in your growth as an investor.
I personally struggled a lot with financial statement analysis. Coming from a background with no financial degree or any education in finance, it was difficult to self learn how to analyze financial statements.
But because I went through the hardship of reading many books, magazines, articles and tutorials to improve my knowledge of accounting and the analysis of financial statements, the following articles will make your journey somewhat easier.
1. How to Master Analyzing the Income Statement
The financial statement is divided into three sections. The income statement is the first part of the financial statement and gets the most attention because it is where the numbers for revenue, net income and earnings per share lives.
This tutorial of the income statement analysis will provide you with insight on how to not just read the income statement, but provide insights on what other points you have to consider as you analyze the income statement in your financial statement analysis.
2. How to Master Analyzing the Balance Sheet
By understanding the balance sheet, you will be able to gain valuable insight into the financial health of the company. This article uses Circuit City as an example to see why the company went bankrupt.
3. How to Master Analyzing the Cash Flow Statement
The cash flow statement is a little different than the income statement and balance sheet, because while you can easily compare income statements by quarter, the cash flow statement is more “accrual”. This means that numbers in the cash flow statement add up or accrue throughout the fiscal year.
Best to go read the final section of the financial statement analysis.
