How to analyze a:
-Cash Flow Statement
-Balance Sheet
-Income Statement
In less than 3 minutes:
-Cash Flow Statement
-Balance Sheet
-Income Statement
In less than 3 minutes:
Accounting is the language of investing.
Understanding how each of these 3 financial statements are connected is crucial for seeking stock investment opportunities
Understanding how each of these 3 financial statements are connected is crucial for seeking stock investment opportunities
1. Cash Flow Statement
The cash flow statement shows how much cash is incoming and outgoing of the business.
Cash is divided into 3 sections:
-Cash from operating activities
-Cash from investing activities
-Cash from financing activities
The cash flow statement shows how much cash is incoming and outgoing of the business.
Cash is divided into 3 sections:
-Cash from operating activities
-Cash from investing activities
-Cash from financing activities
1A. Cash Flow Statement
The things I ask myself:
-Is operating cash flow positive or negative? (Positive)
-Is capital expenditures less than OCF? (Yes)
-Is the company buying back stock or issuing new shares? (Buying back)
These are 3 simple questions to ask yourself
The things I ask myself:
-Is operating cash flow positive or negative? (Positive)
-Is capital expenditures less than OCF? (Yes)
-Is the company buying back stock or issuing new shares? (Buying back)
These are 3 simple questions to ask yourself
2. Balance Sheet
The balance sheet shows how much a company is worth at that point of time.
The balance sheet balances the amount of assets that a company has against its liabilities and stockholders' equity.
Assets = Liabilities + Shareholders' equity
The balance sheet shows how much a company is worth at that point of time.
The balance sheet balances the amount of assets that a company has against its liabilities and stockholders' equity.
Assets = Liabilities + Shareholders' equity
2A. Balance Sheet
The things I ask myself:
-Are the cash & equivalents more than the debt? (Yes)
-How much receivables & inventory does a company have? (Low number)
-How much goodwill is on the balance sheet? (None)
These are 3 simple questions to ask yourself.
The things I ask myself:
-Are the cash & equivalents more than the debt? (Yes)
-How much receivables & inventory does a company have? (Low number)
-How much goodwill is on the balance sheet? (None)
These are 3 simple questions to ask yourself.
3. Income Statement
The purpose of an income statement is to show how a company performs over a period of time via their revenue and expenses.
Another name is the profit and loss statement
The purpose of an income statement is to show how a company performs over a period of time via their revenue and expenses.
Another name is the profit and loss statement
3A. Income Statement
The things I ask myself:
-Is revenue going up? (+35%)
-Is gross profit going up? (+35%)
-Are shares outstanding going up or down? (-3%)
-Are operating expenses stable? (Yes)
These are 4 simple questions to ask yourself.
The things I ask myself:
-Is revenue going up? (+35%)
-Is gross profit going up? (+35%)
-Are shares outstanding going up or down? (-3%)
-Are operating expenses stable? (Yes)
These are 4 simple questions to ask yourself.
I never make an investment without doing a deep dive into every aspect of a stock's financial situation.
You have to understand their finances to make an educated investment.
You have to understand their finances to make an educated investment.
Thank you for reading!
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