General Criteria when Analyzing a Financial Statement

written by: Starcy Dobrovich; article published: year 2006, month 08;


In: Categories » Legal and finance » Investing » General Criteria when Analyzing a Financial Statement

Companies often use their annual reports to attract new investors; you can
guess that these reports contain some marketing fluff and exaggerations.
Most of this embellishment is self-evident. Analyzing a company with a calculator,
paper, and pencil will take you about an hour, and the results of this
examination can help you make sound investment decisions.

Buying stock in a company without reading the annual report is like buying
a used car without seeing it. Here’s a checklist of the information you need
to consider while you review a company’s annual report:

Profitability: How much money did the company make last year?

Survivability: How is the company coping with competition?

Growth: Is the company expanding? How fast is this expansion?

Stability: Is the company subject to radical changes from year to year?

Dividends (if any): Is dividend growth constant? How does it compare
to the industry averages?

Problems: Does the company have any pending lawsuits? Do any other
problems exist?

Risks: Is the company subject to any environmental, political, or
exchange rate risks?

Other factors: Is the management team experienced? Does the company
need more executive talent?

legal disclaimer

1) Our website is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringements, please read the Terms of service and contact us to investigate the problem.
2) The E-articles directory team is not responsible for inaccuracies, falsehoods, or any other types of misinformation this tutorial may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. Please read the Terms of service

Useful tools and features

Translate this article to...    Send this article to you or to a friend

Link to this article from your page   
If you like this article (tutorial), please link to it from your web page using the information above. Linking to this page, this is the only way to help us improve our service, the same time providing your visitors with a way to improve their online experience.

related articles

1. Online Trading and the Active Investor
Today, many mainstream full-service and online brokerages offer active and hyperactive investors special software, amenities, and low trading fees. Active investors are often defined as individuals who place at least 36 stock, bond, or option trades per year and have $25,000 or more in assets. Some of the special services these investors receive are Multiple order-entry screens that enable active investors to send many trades with just one click of the mouse Low trading fees that are often a fr...

2. How to Set Up a Basic Investment Search Strategy
Search engines are commercial enterprises that collect and index Web pages or Web page titles. You can use them to help you sift through all the Web pages out there so that you can find the information you need. Some of these enterprises review the sites they collect, and others provide site information unfiltered and unedited. Some search engines (like Yahoo! at www.yahoo.com) are hierarchical indexes and use subject listings that are similar to the card catalog in a library. Often, you can search hierarchical ind...

3. Checking Out Hybrid Online Banks and Brokerages
The Financial Services Modernization Act of 1999 allowed banks and brokerages to offer a full menu of financial products and services. This deregulation, among other things, means that your brokerage can offer you the same products and services as your bank, including having your accounts insured by the Federal Deposit Insurance Corporation (FDIC). Combining your bank and brokerage can reduce the amount of fees you have to pay and the time you spend online monitoring your accounts. Kiplinger’s (www.kiplinger.com...

4. How Small Investors Can Make Money with Fixed Income Investments and Bonds
In addition to bonds, banks and savings and loan associations have developed new ways of keeping customer assets in their financial institutions. They often offer a variety of investment plans that provide higher returns than traditional fixed-rate savings accounts. For example, many savings and loan associations allow their customers to invest in commercial paper  (uninsured promissory notes to large business entities) instead of certificates of deposit (an insured type of time deposit)....

5. Using Free and Fee Based Online Investor Databases
Online investors have their choice of searching free or fee-based online databases. One advantage of both types of databases is that they’re constantly open. That is, you can access them 24 hours a day, 7 days a week. It’s a no-brainer that savvy online investors should start with the free databases. If the information you desire isn’t available in the free databases, try fee-based databases. If you carefully select a fee-based database for your well-constructed query, you can often get the informat...

6. Using the Internet to Make Financial Planning Easier
Many people find it difficult to shake off the notion that if they’re not wealthy, they don’t need to do any financial planning. Stock market volatility, inflation, changing interest rates, unemployment, illness, and hard times are part of life. To do no financial planning or to let others (your spouse, employer, broker, or financial advisor) do all your planning is to flirt with disaster. Remember that no one cares more about your financial well-being than you do. The Internet makes financial planning eas...

7. Maximizing Your Investments with Tax Deferred Accounts
An individual retirement account (IRA) is one of the best ways you can accumulate something to invest because making contributions and earnings is often tax-free. An IRA must be established with a financial institution that has received Internal Revenue Service (IRS) approval to offer IRAs. These financial institutions include banks, brokerages, federally insured credit unions, and savings and loan associations. IRA accounts can be established at any time. Contributions must be made by the IRA owner’s tax-filin...