It is important to have a long-term investment horizon when getting started in stocks.

Time is on Your Side

Just as compound interest can dramatically grow your wealth over time, the longer you invest in stocks, the better off you will be.

With time,

• your chances of making money increases, and 
• the volatility of your returns decreases.

The Longer you invest, the Lower the Volatility of your Returns

The average annual return for the S&P 500 stock index for a single year has ranged from -39% to +61%, while averaging 13.2%.

After holding stocks for 5 years, average annualised returns have ranged from -4% to +30%, while averaging 11.9%.

If your holding period is 20 years, you never lost money, with 20-year returns ranging from +6.4% to +15%, with the average being 9.5%.


These returns easily surpass those you can get from any of the other major types of investments.




The Importance of having a Long-term Investment Horizon in Stocks

Again, as your holding period increases,

• the expected return variation decreases, and 
• the likelihood for a positive return increases.  

This is why it is important to have a long-term investment horizon when getting started in stocks.





Summary


While stocks make an attractive investment in the long run, stock returns are not guaranteed and tend to be volatile in the short term.


We do not recommend that you invest in stocks to achieve your short-term goals.


To be effective, you should invest in stocks only to meet long-term objectives that are at least 5 years away.


The longer you invest, the greater your chances of achieving the types of returns that make investing in stocks worthwhile.




Additional notes:

Though stocks typically perform best over the long term, there can be extended periods of poor performance.  

For example, the DJIA peaked in 1966 and didn't surpass its old high again until 16 years later in 1982.  But the following 20 years were great for stocks, with the Dow increasing more than tenfold (10x) by 2002.

Volatility of the Stock Market

One way of reducing the risk of investing in individual stocks is by holding a larger number of stocks in a portfolio.

However, even a portfolio of stocks containing a wide variety of companies can fluctuate wildly.

• You may experience large losses over short periods.
• Market dips, sometimes significant, are simply part of investing in stocks.

Yearly Market Fluctuations

The yearly returns in the stock market also fluctuate dramatically.  

The highest one-year rate of return of +67% occurred in 1933, while the lowest one-year rate of return of -53% occurred in 1931. 

It should be obvious by now that stocks are volatile, and there is significant risk if you CANNOT RIDE OUT MARKET LOSSES IN THE SHORT TERM.




The Bright Side of this Story

But don't worry; there is a bright side to this story.

Despite all the short-term risks and volatility, stocks as a group have had the highest long-term returns of any investment type.  

This is an incredibly important fact!

• When the stock market has crashed, the market has always rebounded and gone on to new highs. 
• Stocks have outperformed bonds on a total real return (after inflation) basis, on average.  

This holds true even after market peaks.

If you had deplorable timing and invested $100 into the stock market during any of the seven major market peaks in the 20th century, that investment, over the next 10 years, would have been worth $125 after inflation, but it would have been worth only $107 had you invested in bonds, and $99 if you had purchased government Treasury bills.

In other words, stocks have been the best-performing asset class over the long term, while government bonds, in these cases, merely kept up with inflation.

This is the whole reason to go through the effort of investing in stocks.

• Even if you had invested in stocks at the highest peak in the market, your total after-inflation returns after 10 years would have been higher for stocks than either bonds or cash.
• Had you invested a little at a time, not just when stocks were expensive but also when they were cheap, your returns would have been much greater.

Volatility of Single Stocks

Volatility of Single Stocks

Individual stocks tend to have highly volatile prices.

The returns you might receive on any single stock may vary wildly.



Best Performing Stocks

If you invest in the right stock, you could make bundles of money.

• For instance, Eaton Vance, an investment-management company, has had the best-performing stock for almost 25 years.  If you had invested $10,000 in 1979 in Eaton Vance, assuming you had reinvested all dividends, your investment would have been worth $10.6 million by December 2004.

Worst Performing Stocks

On the downside, since the returns on stock investments are not guaranteed, you risk losing everything on any given investment.

• There are hundreds of dot-com investments that went bankrupt or are trading for a fraction of their former highs in early 2000.

• Even established, well-known companies such as Enron, WorldCom and Kmart filed for bankruptcy and investors in these companies lost everything.

All Stocks in Between these two Extremes

Between these two extremes is the daily, weekly, monthly and yearly fluctuation of any given company's stock price.

• Most stocks won't double in the coming year, nor will many go to zero.

• But the average difference between the yearly high and low stock prices of the typical stock on the NYSE is nearly 40%.

Stocks that don't perform over Long Time

In addition to being volatile, there is the risk that a single company's stock price may not increase significantly over time. 

• In 1965, you could have purchased General Motors' stock for $50 per share (split adjusted).  By May 2005 (4 decades later), your shares of General Motors would be worth only about $30 each.  Though dividends would have provided some ease to the pain, General Motors' return has been terrible.  
• You would have been better off if you had invested your money in a bank savings account instead of General Motors' stock.

All your Eggs in a Single Basket

Clearly, if you put all of your eggs in a single basket, sometimes that basket may fail, breaking all the eggs.

Other times, that basket will hold the equivalent of a winning lottery ticket.

With compound interest, the last few years of compounding make the most difference.

The 3 components that determine how much money you will have in the future are:

1.  the amount of money invested,
2.  the length of time invested, and
3.  the rate of return.

The earlier you invest, the more you invest, and the higher the rate of return, the more money you will have in the future.

The primary attraction to investing in stocks is that the long-run rate of return is higher than the interest earned in bank accounts or bonds.

With compound interest, the last few years of compounding make the most difference.




Additional notes:

The rule of 72 is an easy rule of thumb that tells you how often your money doubles.  Divide 72 by the percentage rate of return to determine the number of years required for your money to double at that rate of return.

Why Invest in Stocks?

Why stocks?

Stocks are but one of many possible ways to invest your hard-earned money.

Why choose stocks instead of other options, such as bonds, real estates, bank savings accounts, rare coins, or antique sports cars?

The reason that savvy investors invest in stocks is that they provide the highest potential returns.

Over the long term, no other type of investment tends to perform better.



Downside

On the downside, stocks tend to be the most volatile investments.

This means that the value of stocks can drop in the short term.

Sometimes stock prices may fall for a protracted period.

Bad luck or bad timing can easily sink your returns, but you can minimise this by taking a long-term investing approach.



Returns

There is also no guarantee you will actually realize any sort of positive return.

If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term!



Education

By educating yourself, you can make the risk acceptable relative to your expected reward.

With knowledge, you can pick the right businesses to own and to spot the ones to avoid.

This effort is well worth it, because over the long haul, your money can work harder for you in equities than in just about any other investments.








Additional notes:

A slightly higher return in your investments can lead to dramatically larger dollar sums for whatever your financial goals in life may be,

Investing in stocks is an intellectual exercise and requires effort, but it is an effort that can bear many fruits.

Among the potential investments one can make, stocks provide the largest long-term returns, but they also have the largest volatility.

Stocks are ownership interests in companies.  They are not simply pieces of paper to be traded.

Understanding Your Circle of Competence

If Buffett cannot understand a company's business, then it lies beyond his circle of competence and he won't attempt to value it.

He famously avoided technology stocks in the late 1990s in part because he had no expertise in technology.

On the other hand, Buffett continued to buy and hold what he knew.

Although it might seem obvious that investors should stick to what they know, the temptation to step outside one's circle of competence can be strong.

Buffett has written that he isn't bothered when he misses out on big returns in areas he doesn't understand, because investors can do very well (as he has) buy simply avoiding big mistakes.

He believes that what counts most for investors is not so much what they know but how realistically they can define what they don't know.

Concentrating on Your Best Ideas

Buffett has difficulty finding understandable businesses with sustainable competitive advantages and excellent managers that also sell at discount to their estimated fair values.

Therefore, his investment portfolio has often been concentrated in relatively few companies.

Buffett rejects the idea that diversification is helpful for the INFORMED investors.

On the contrary, he thinks the addition of an investor's 20th favourite holding is likely to lower returns and increase risk compared with simply adding the same amount of money to the investor's top choices.

Successful investing requires the rare ability to identify and overcome one's own psychological weaknesses.

Successful investing is hard, but it doesn't require genius.

Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

Successful investing requires the rare ability to identify and overcome one's own psychological weaknesses.

Behavioural finance attempts to explain why people make financial decisions that are contrary to their own interests.

Behavioural finance has a lot to offer in terms of understanding psychology and the behaviour of investors, particularly the mistakes that they make.  

Much of the field attempts to extrapolate larger, macro trends of influence, such as how human behaviour might move the market.

We can also focus on how the insights from the field of behavioural finance can benefit individual investors.  Primarily, we are interested in how we can learn to spot and correct investing mistakes in order to yield greater profits.


Some insights one can focus on in behaviour finance are:

• Overconfidence
• Selective Memory
• Self-Handicapping
• Loss Aversion
• Sunk Costs
• Anchoring
• Confirmation Bias
• Mental Accounting
• Framing Effect
• Herding

Non-Market Risk and a Concentrated Portfolio

Holding a concentrated portfolio is not as risky as one may think.

Just holding 2 stocks instead of 1, eliminates 46% of your unsystemic risk.

Holding only 8 stocks will eliminate about 81% of your diversifiable risk.


What about the range of returns?

Average return of the stock market during one period examined was about 10%.

Statistically, the one-year range of returns for a market portfolio (holding scores of stocks) in this period was between -8% and +28% about two-thirds of the time.  One-third of the time, the returns fell outside this 36-point range.

If your portfolio is limited to only 5 stocks, the expected return remains 10%, but your one-year range expands to between -11% and +31% about two-thirds of the time.

If there are 8 stocks, the range is between -10% and +30%.


Conclusion

It takes fewer stocks to diversify a portfolio than one might intuitively think.

Circle of Competence and Sector Concentration.

If you are investing within your cicle of competence, your stock selections will gravitate toward certain sectors and investment styles.

Following the fat-pitch strategy, you will naturally be overweight in some areas you know well and have found an abundance of good businesses.

Likewise, you may avoid other areas where you don't know much or find it difficult to locate good businesses.

However, if all your stocks are in one sector, you may want to think about the effects that could have on your portfolio.

Portfolio Weighting

It is important to know:

1.  how many stocks to own in your portfolio, and also,
2.  the percentage of your portfolio occupied by each stock.

A good investor has a knack for having a greater percentage of their money in stocks that do well and a lesser amount in their bad picks.


How does he do it?

Essentially, a portfolio should be weighted in direct proportion to how much confidence you have in each pick.

If you have a lot of confidence in the long term outlook and the valuation of a stock, it should be weighted more heavily than a stock than a stock you may be taking a flier on.


Weight your portfolio wisely.

Don't be too afraid to have some big weightings, but be certain that the highest-weighted stocks are the ones you feel the most confident about.

Of course, do not go off the deep end by having, for example, 50% of your portfolio in a single stock.



Additional notes:

If a stock has a 10% weighting in your portfolio, then a 20% change in price will move your overall portfolio 2%.

If a stock has only a 3% weighting, a 20% price change has only a 0.6% effect on your portfolio.

The Appropriate Attitude towards Market Prices

Once Mr. Buffett has decided that he is competent to evaluate a company, that the company has sustainable advantages and that it is run by commendable managers, then he still has to decide whether or not to buy it.



To buy or not to buy:  This step is the most crucial part of the process.

The decision process seems simple enough:  If the market price is below the discounted cash flow calculation of fair value, then the security is a candidate for purchase.

The available securities that offer the greatest discounts to fair value estimates are the ones to buy.

However, what seems simple in theory is difficult in practice.

• A company's stock price typically drops when investors shun it because of bad news.  So a buyer of cheap securities is constantly swimming against the tide of popular sentiment.
• Even investments that generate excellent long-term returns can perform poorly for years.  [In fact, Buffett wrote an article in 1979 explaining that stocks were undervalued, yet the undervaluation only worsened for another three years.]
• Most investors find it difficult to buy when it seems that everyone is selling and difficult to remain steadfast when returns are poor for several consecutive years.

The appropriate attitude toward market price

Buffett credits his late friend and mentor, Benjamin Graham, with teaching him the appropriate attitude toward market prices.

Graham's parable:  "Imagine the daily quotations as coming from Mr. Market, your very temperamental partner in a private business.  Each day he offers you a price for which he will buy your share of the business or for which you can buy his share of the business.  On some days he is euphoric and offers you a very high price for your share.  On other days he is despondent and offers a very low price.  Mr. Market doesn't mind if you abuse or ignore him - he will be back with another price tomorrow."




The most important thing to remember about Mr. Market.

He offers you the potential to make a profit, but he does not offer useful guidance.

If an investor cannot evaluate his business better than Mr. Market, then the investor doesn't belong in that business.

Thus, Buffett invests only in predictable businesses that he understands, and he ignores the judgement of Mr. market (the daily market price) except to take advantage of Mr. Market.

Wide Moat Companies: Fat Pitch Approach and Low Turnover of Portfolio.

Fat Pitch method.

Great companies (wide-moat) selling at a discount are rare. So when you find one, you should pounce.

Over the years, a wide-moat company will generate returns on capital higher than its cost of capital, creating value for shareholders.

 This shareholder value translates into a higher stock price over time.




Move In and Out of Wide-Moat Stocks

IF YOU SELL AFTER MAKING A SMALL PROFIT, you might not get another chance to buy the stock, or a similar high-quality stock, for a long time.

For this reason, it is irrational to quickly move in and out of wide-moat stocks and incur transactions costs ( and also capital gain taxes in some countries).

 Your results after trading expenses (and taxes), likely won't be any better and may be worse.




Low Turnover

That is why many of the great long-term investors display low turnover in their portfolios.

 They have learned to LET THEIR WINNERS RUN AND TO THINK LIKE OWNERS, NOT TRADERS.

Stocks are ownership interests in companies.

Being a stockholder is being a partial owner of a company.

Over the long term, a company's business performance and its stock price will converge.

The market rewards companies that earn high returns on capital over a long period.

Companies that earn low returns may get an occasional bounce in the short term, but their long-term performance will be just as miserable as their returns on capital.

The wealth a company creates - as measured by returns on capital - will find its way to shareholders over the long term in the form of dividends or stock appreciation.



My favourite financial ratios: ROA, ROE and ROIC.

Using Earnings Power Value (EPV) to weigh up the value of a share

Earnings Power Value (EPV) is another way to weigh up the value of a share.

EPV gives you an estimated value of a share if its current cash profits stay the same forever.



Calculating EPV

This is how you calculate it.

1.  Take a company's normalised or underlying trading profits or EBIT.

2.  Add back depreciation and amortization.

3.  Take away stay in business capex.

4.  Tax this cash profit number by the company's tax rate.

5.  Divide by a required interest rate# to get an estimate of total company or enterprise value.

6.  Take away debt, pension fund deficit, preferred equity and minority intersts to get a value of equity.  Add any surplus cash.

7.  Divide by the number of shares in issue to get an estimate of EPV per share.



#What interest rate should you use when valuing a business?

All you need to know is that the higher the interest rate you use, the more conservative your estimate of value will be.

Here are some rough and ready guidelines of the interest rates you might want to use when valuing different companies:

• Large and less risky companies:  7% to 9%
• Smaller and more risky (lots of debt or volatile profits):  10% to 12%
• Very small and very risky:  15% or more.

Compare your estimate of EPV per share with the current share price.  

1.   Current Share Price > EPV

For example:
                      EPV per share                    151.4
                      Current Share Price            320 

We can see that the estimate of EPV accounts for less than half of the existing share price.

• A large chunk of the current 320 price is based on the expectation of future profit growth.  

2.   Current Share Price < EPV

EPV can be a great way of spotting very cheap shares. 

Sometimes it is possible to find shares which are selling at a significant discount to their EPV.

• When you come across a share like this, you need to spend time considering whether its current profits can stay the same, or whether they are likely to fall.  
• If profits are likely to fall, it might be best to move on and start looking at other shares.

To minimise the risk of overpaying for a company's shares, you should try to buy when its current profits - its EPV - can explain as much of the current share price as possible.

• As a rough rule of thumb, even if profits and cash flows have been growing rapidly, do not buy a share where more than half its share price is reliant on future profits growth.  

An example of how to calculate EPV

Company ABC  Earnings Power Value ($m)

Underlying EBIT                                      73.6
Dep & Amort                                              6.6
Stay in business CAPEX                           -8.9
Cash trading profit                                    71.3
Tax @ 20%                                              -14.3
After tax cash profits (A)                       57.0
Interest rate (B)                                        8%
EPV = A/B                                                713

ADJUSTMENTS
Net debt/net cash                                      40.4
Preference Equity                                          0
Minority interests                                          0
Pension fund deficit                                       0
Equity value                                          753.4
Shares in issue (m)                                497.55
EPV per share (cents)                           151.4

Current share price (cents)                         320
EPV as % of current share price                47.3%
Future growth as % of current share price 52.7%

Buying a home? Be financially mindful.

Excellent podcast.
Click here:  https://www.bfm.my/rns-desmond-chong-akpk-buying-a-home-be-financially-mindful


Desmond Chong, Credit Counselling and Debt Management Agency (AKPK)

06-Sep-18 10:37


Desmond points out some financial and non-financial factors that have to be taken into consideration when purchasing property.



Presented by: Tan Chung Han

Tags: Mortgage, Debt, Home, House, Rent, Freehold, Leasehold, Property, Financial Services, Personal Finance

How to be successful in using technical analysis

To be successful, the technical approach involves taking a  position contrary to the expectation of the crowd.

This requires the patience, objectivity and discipline to acquire a financial asset at a time of depression and gloom, and liquidate it in an environment of euphoria and excessive optimism.

The level of pessimism or optimism will depend on the turning point.

Short-term peaks and trough are associated with more moderate extremes in sentiment than long-term ones.

Knowing the technical characteristics to be expected at all of these market turning points, particularly the major ones, allow you to assess them objectively.





Technical analysis in Practice

In practice, it is impossible to buy and sell consistently at exactly the turning points, but the enormous potential of this approach still leaves plenty of room for error, even when commission costs and taxes are included in the calculation. 

The rewards for identifying major market junctures and taking the appropriate action can be substantial.

In the days of the old market, participants had a fairly long time horizon, stretching over months or years.  There have always been short-term traders and scalpers, but the technological revolution in communications has shortened the time horizon of just about everyone involved in markets.

When holding periods are lengthy, it is possible to indulge in the luxury of fundamental analysis, but when time is short, timing is everything.  In such an environment, technical analysis really comes into its own.

Originally, technical analysis was applied principally in the equity market, but its popularity has gradually expanded to embrace commodities, debt instruments, currencies, and other international markets.

Technical Analysis Defined

The technical approach to investment is essentially a reflection of the idea that prices move in trends that are determined by the changing attitudes of investors toward a variety of economic, monetary, political and psychological forces.

The art of technical analysis, for it is an art, is to identify a trend reversal at a relatively early stage and ride on that trend until the weight of the evidence shows or proves that the trend has reversed.  The evidence in this case is represented by the numerous scientifically derived indicators.

Human nature remains more of less constant and tends to react to similar situations in consistent ways.  By studying the nature of previous market turning pints, it is possible to develop some characteristics that can help to identify market tops and bottoms.  

Therefore, technical analysis is based on the assumption that people will continue to make the same mistakes they have made in the past.  

Human relationships are extremely complex and never repeat in identical combinations.  The market,s which are a reflection of people in action, never duplicate their performance exactly, but the recurrence of similar characteristics is sufficient to enable technicians to identify juncture points.  

Since no single indicator has signaled, or indeed could signal, every top or bottom, technical analysis have developed an arsenal of tools to help isolate these points.

A study of the market can also reveal much about human nature, both from observing other people in action and from the aspect of self-development.

There is no reason why anyone cannot make a substantial amount of money in the financial markets, but there are many reasons why many people will not.

The key to success is knowledge and action.  

• Knowledge of the internal working of the markets and of investing is important.  
• Action is dependent on the patience, discipline and objectivity of the individual investor. 

Today, numerous charting sites have sprung up on the Internet, so virtually anyone now has the ability to practice technical analysis.  As a consequence of the technological revolution, time horizons have been greatly shortened.

• This may not be a good thing because short-term trends experience more random noise than longer-term ones.  
• This means that the technical indicators are not as effective.

Nothing has really changed in the last 100 years.  The same true and tried principles in technical analysis are as relevant today as they always were.  There is no doubt whatsoever that this will continue to be so in the future.

• Thus, technical analysis could be applied in New York in 1850, in Tokyo in 1950 and in Moscow in 2150.  
• This is true because price action in financial markets is a reflection of human nature, and human nature remains more or less constant.  
• Technical principles can also be applied to any freely traded entity in any time frame.  
• A trend reversal signal on a 5-minute bar chart is based on the same indicators as one on a monthly chart; only the significance is different.  Shorter time frames reflect shorter trends and are therefore less significant.   

Since the 1970s, the time horizon of virtually all market participants has shrunk considerably.

• As a result, technical analysis has become very popular for implementing short-term timing strategies.  
• This use may lead to great disappointment.

There is a rough correlation between the reliability of the technical indicators and the time span being monitored.

• Even short-term traders with a 1- to 3-week time horizon need to have some understanding of the direction and maturity of the main or primary trend.  
• This is because mistakes are usually made by taking on positions that go against the direction of the main trend.  
• If a whipsaw is going to develop, it will usually arise from a contra-trend signal.

To be successful, technical analysis should be regarded as the art of assessing the technical position of a particular security with the aid of several scientifically researched indicators. 

• Although many of the mechanistic techniques offer reliable indications of changing market conditions, all suffer from the common characteristic that they can, and often do, fail to operate satisfactorily.  
• This attribute present no problem to the consciously disciplined investor or trader, since a good working knowledge of the principles underlying major price movements in financial markets and a balanced view of the overall technical position offer a superior framework within which to operate.  

There is no substitute for independent thought.

• The action of the technical indicators illustrates the underlying characteristics of any market and it is up to the analyst to put the pieces of the jigsaw puzzle together and develop a working hypothesis.
• The task is by no means easy, as initial success can lead to overconfidence and arrogance.  

"Pride of opinion caused the downfall of more men on Wall Street than all the other opinions put together."  Charles H. Dow, the father of technical analysis.

This is true because markets are essentially a reflection of people in action.

• Normally, such activity develops on a reasonably predictable path.  
• Since people can and do change their minds, price trends in the market can deviate unexpectedly from their anticipated course.  
• To avoid serious trouble, investors, and especially traders, must adjust their attitudes as changes in the technical position emerge.

A study of the market can also reveal much about human nature, both from observing other people in action and from the aspect of self-development.  

• As investors react to the constant struggle through which the market will undoubtedly put them, they will also learn a little about their own makeup.  

"Little minds are taxed and subdued by misfortune but great minds rise above it."  Washington Irving.



Martin J. Pring
Technical Analysis Explained

Investing basics: Key constituents of an annual report

An annual report is probably among the most viewed company publications. It is the most comprehensive means of communication between a company and its shareholders. It is a report that each company must provide to each of its shareholder at the end of the financial year. To put it differently, it is a report that each shareholder must read.

But what is its use if one does not understand or refer to it?


As a shareholder of a company, you need to know its performance over the past financial year and the management's view on the same. You also need to know what is the company's future plan and strategies. As a shareholder, you need to know what does the management intends to do to attain those targets.

We present to you a brief on what the key constituents of an annual report are.

Key constituents of an Annual Report

Director's report: The director's report comprises the events that take place in the reporting period. This includes a summary of financials, analysis of operational performance, details of new ventures and business, performance of subsidiaries, details of change in share capital, and details of dividends. In short, shareholders can get a gist of the fiscal year from this section.

Management discussion and analysis (MD&A): More often than not, the MD&A starts off with the management giving its view on the economy. It is then followed by a perspective on the sector in which the company is present. Any major changes like inflation, government policies, competition, tax structures, amongst others are highlighted and discussed in this report. It also includes the business strategy the management intends to follow. Details regarding different segments are provided in this section. The company also gives a brief SWOT (strength, weakness, opportunity, and threat) analysis and business outlook for the coming fiscal.

This can aid the shareholder to understand what major changes are likely to affect the company going forward. However, as mentioned earlier, an investor should not blindly believe what the management has to say. While it tends to paint a rosy picture, one needs to judge the sanity behind the rationale.

Report on corporate governance: The report on corporate governance covers all aspects that are essential to the shareholder of a company and are not part of the daily operations of the company. It includes details regarding the directors and management of a company. These include details such as their background and their remuneration. This report also provides data regarding board meetings - how many directors attended the how many meetings. It also provides general shareholder information such as correspondence details, details of annual general meetings, dividend payment details, stock performance, details of registrar and transfer agents and the shareholding pattern.

Financial statements and schedules: Finally, we arrive at the crux of the annual report, the financial statements. Financial statements, as you are aware, provide details regarding the operational performance of a company during the reporting period. In addition, it also depicts the financial strength of a company. The key constituents of the financial statement include the profit and loss account, the balance sheet, the cash flow statement and the schedules.



This article is authored by Equitymaster.com, India’s leading independent equity research initiative

https://premium.thehindubusinessline.com/portfolio/beyond-stocks/investing-basics-key-constituents-of-an-annual-report/article23153778.ece