In a Berkshire shareholders' annual meeting, a New York University MBA student asked Buffett for his advice on how to develop Buffett-like skills. In his response, Buffett mentioned that the student should take as many accounting course as possible.
Remember that you are a consumer and not a prepare of financial information. Act like a detective trying to understand the company's business from reading financial statements.
Buffett reads a lot of financial reports; and for him, perhaps, that is like reading detective novels. As a reader of financial statements, you could have fun discovering behind-the-curtain stories.
Accounting numbers are based on a large number of estimates, and hence, they are not really hard numbers. Yet, academic research shows that long-short investing strategies can often be developed by using accounting knowledge.
When you study financial statements, be a skeptic. Most accounting numbers are reliable, but you must remain vigilant.
Related readings:
Videos-Financial Accounting by Susan Crosson
Where is Ze Moola
Visit this site to see how this blogger dissect the companies through using his accounting and other knowledge.
No comments:
Post a Comment