Do not drown in financial detail

You may be given a vast amount of financial information, particularly if you work for a large company.

This could be because someone believes that it is useful or just because the system automatically provides it.

Remember the old saying about not being able to see the wood for trees.

Learn to concentrate on what is important and give little or no attention to the rest.

That way you will get the key financial information and still have time to do your job.

This is particularly important when things are tough and your time is at a premium.

Identifying Durable Competitive Advantages by Analyzing Financial Statements.

Part one: Finding Durable Competitive Advantages by Analyzing the Income Statement

Part two: Finding Durable Competitive Advantages through the Balance Sheet

Part three: Finding Durable Competitive Advantages through the Cash Flow Statement

Reference:
The Value Investing Blog
http://www.oldschoolvalue.com/stock-valuation-spreadsheet.php

Warren Buffett's Interpretation of Financial Statements and Analysis

Warren Buffett's Interpretation of Financial Statements and Analysis




Warren Buffett's Interpretation of the Income Statement and Analysis



Warren Buffett's Interpretation of a Balance Sheet and Analysis



Warren Buffett's Interpretation of Cash Flows and Analysis

Types of Investment Information

Investment information can be divided into 5 types, each concerned with an important aspect of the investment process.

1.  Economic and current event information.

This includes background as well as forecast data related to economic, political, and social trends on a domestic as well as a global scale.  Such information provides a basis for assessing the environment in which decisions are made.

2.  Industry and company information.

This includes background as well as forecast data on specific industries and companies.  Investors use such information to assess the outlook in a given industry or a specific company.  Because of its company orientation, it is most relevant to stock, bond or options investments.

3.  Information on alternative investment vehicles.

This includes background and predictive data for securities other than stocks, bonds, and options, such as mutual funds and futures.

4.  Price information.

This includes current price quotations on certain investment vehicles, particularly securities.  These quotations are commonly accompanied by statistics on the recent price behaviour of the vehicle.

5.  Information on personal investment strategies.

This includes recommendations on investment strategies or specific purchase or sale actions.  In general, this information tends to be educational or analytical rather than descriptive.

Interpreting Financial Information

1.  WHY INTERPRETE FINANCIAL DATA?
It helps to know your markets, measure growth, and make authoritative decisives.


2.  WHAT ARE COMMON BENCHMARKS?
Sales revenues, profits, number of stores, and customers.


3.  HOW DO YOU EVALUATE PERFORMANCE?

COST-BENEFIT ANALYSIS
WHAT IS IT?  You weigh the expected costs of launching or running a business against the expected benefits.  The costs involved are variable (diretly involved with the new activity) and fixed (these remain more or less the same, regardless of the new business).

RETURN ON INVESTMENT
WHAT IS IT?  A method used to measure the benefits of the project over the length of time of a project (when this is time specific).
You divide the net profit expected for the first year by the amount of expenditure and express it as a percentage of the outlay.

BREAKEVEN ANALYSIS
WHAT IS IT?  It provides a way of finding out how many sales are necessary to recoup the capital spent on the original investment.  You need to know your contribution margin (the percentage of each sales dollar left over after variable costs are taken aways from overall profits).

TIME VALUE OF MONEY
WHAT IS IT?   It describes the concept that a dollar received today is worth more than a dollar received at some point in the future because the dollar received today can be invested to earn interest.  The harsh reality is that future benefits may be worth less dollar for dollar than if the capital outlay was put in an investment fund.


4.  WHAT ARE THE WAYS TO VALUE A COMPANY?

HARD NUMBERS.  These are based on existing figures and include equity book value (assets minus liabilities) and fair market value (the value established between a willing buyer and a willing seller).

SOFT NUMBERS.  These are based on estimates of future benefits and therefore contain an element of subjectivity.

INTANGIBLE ASSETS. These include people, knowledge, relationships, intellectual property, brand names, loyal customer base, copyrights or trademarks, mailing lists, long-term contracts, and franchises.