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Many articles and books on financial statement analysis take a one-size-fits-all approach.Less-experienced investors might get lost when they encounter a presentation of accounts that falls outside the mainstream or a so-called "typical" company.In the best of circumstances, management is scrupulously honest and candid, while the outside auditors are demanding, strict and uncompromising.
The numbers in a company's financial statements reflect the company's business; it's products, services, and macro-fundamental events.
These numbers and the financial ratios or indicators derived from them are easier to understand if you can visualize the underlying realities of the fundamentals driving the quantitative information.
His principal point was that in business you keep score with dollars, and the scorecard is a financial statement.
He recognized that "a lot of people don't understand keeping score in business. Thomsett says in "Mastering Fundamental Analysis" (1998): "That there no secret is the biggest secret of Wall Street and of any specialized industry.
Knowing how to work with the numbers in a company's financial statements is an essential skill for stock investors.
The meaningful interpretation and analysis of balance sheets, income statements, and cash flow statements to discern a company's investment qualities is the basis for smart investment choices.However, the diversity of financial reporting requires that we first become familiar with certain financial statement characteristics before focusing on individual corporate financials.In this article, we'll show you what the financial statements have to offer and how to use them to your advantage.The lack of any appreciable standardization of financial reporting terminology complicates the understanding of many financial statement account entries.This circumstance can be confusing for the beginning investor.The only factor complicating financial information is jargon, overly complex statistical analysis and complex formulas that don't convey information any better than straight talk." The financial statements used in investment analysis are the balance sheet, the income statement, and the cash flow statement with additional analysis of a company's shareholders' equity and retained earnings.