Brian Feroldi (🧠,📈)

Brian Feroldi (🧠,📈)

18-09-2022

13:14

How to analyze a: ▪️Balance Sheet ▪️Income Statement ▪️Cash Flow Statement In less than 5 minutes:

Every company has 3 financial statements. Each answers a unique question: 1. Balance Sheet: What’s your net worth? 2. Income Statement: Are you profitable? 3. Cash Flow Statement: Are you generating cash?

The financial statements are interrelated. Each views a company’s financials from a different angle. When combined, they provide a more complete view of a company’s true financial position.

1A: Balance Sheet This tells you a company’s net worth at a specific point in time. Layout:

1B: What I focus on first: 1⃣ Cash & Equivalents: How much? 2⃣ Debt: How much vs. cash? 3⃣ Goodwill: How much? 4⃣ Retained Earnings (+ T.S.): Positive? 5⃣ Receivables & Inventory: How much?

1C: Best Possible Answers 1⃣Cash & Equivalents: More than debt 2⃣Short & Long-Debt: None 3⃣Goodwill: Zero 4⃣Retained Earnings (+ T.S.): Positive 5⃣ Receivables & Inventory: None

2A: The Income Statement This tells you if a company is “profitable” or not during a period of time Layout:

2B: I look at 2 income statements with comparable periods. What I focus on first: 1⃣Revenue: Up or down? 2⃣Gross Profit: Up or down? 3⃣EPS (Diluted): Positive or negative? 4⃣Shares Outstanding: Up or down? 5⃣Operating Expenses: Up or down?

2C: Best Possible Answers 1⃣Revenue: Up 30%+ 2⃣Gross Profit: Up 30%+ 3⃣EPS: Up 30%+ 4⃣Shares Outstanding: Down 4%+ 5⃣Operating Expenses: Stable

3A: The Cash Flow Statement This tells you how cash moves in and out of a business over a period of time. Layout:

3B: What I focus on first: 1⃣OCF: Positive or negative? 2⃣CapEx: More or less than OCF? 3⃣NCC: Any big numbers? S.B.C.? 4⃣Stock: Issuance or buybacks? 5⃣Debt: Borrow or repay?

3C: Best possible answers 1⃣ OCF: Positive (+ Growing) 2⃣CapEx: Much less than OCF 3⃣NCC: Nothing noteworthy + Low SBC 4⃣Stock: Buybacks ✅ 5⃣Debt: Repayment✅

I’d never make an investment decision without MUCH more analysis than this. Accounting (and investing) is FILLED with nuance Still, with <1 minute of analysis per financial statement, you can quickly identify a company's strengths + weaknesses

If you invest, you MUST learn accounting That's why @Brian_Stoffel_ and I created a course that teaches accounting in plain English Registration closes TONIGHT (9/18) at 11:59 PM EDT! Interested? DM me for a special coupon code.

Prefer to keep learning for free? Read this thread I wrote about the cash flow statement next:



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