Financial Statements - Part One
Understanding Financial Statements David Eghbali - Part One
The purpose of this article is to help you understand financial statements, no matter what level of schooling, you have had. You might have heard a neighbor rave about making money on the stock exchange. Naturally, you want a "piece of the pie." Financial expert David Eghbali has taught me how to read financial statements and choose between different corporate stocks for my portfolio. He uses regular language to take the mystery out of the corporate financial statement.
At first, it can be scary to try to understand all of the jargon found on a financial statement. Somehow, I know that the figures all mean something, but it is still Greek to me. I am not a genius with a Ph.D in economics from the University of Cambridge. I just wanted to find a good corporate stock paying me some healthy dividends. People kept saying that I should save for retirement - finally I took their advice.
Why is corporate reporting necessary?
#CorporateReporting
David Eghbali has explained that a healthy capitalistic system requires that the macroeconomic concept of "perfect information" be established. The theory of "perfect information" requires that all parties are given the same information at the same time. David Eghbali said that this is why "insider trading" is a crime. With "insider trading," information is only given to the few, not the masses.
Public Traded Companies Share Information in Financial Statements
#FinancialStatements
I learned that there are different types of financial statement. David Eghbali told me that there are annual reports, balance sheets, income statements and more. Shareholders might be located all around the world and these public financial statements ensure that all individuals will have the same access to essential information.
Who Reads Financial Statements?
#ReadFinancials
Governments, businesses, banks, pension funds, professors, analysts, reporters, shareholders and investors all view financial statements, according to David Eghbali. Competitors might wonder how others have fared. Financial institutions will see how the entire industry is doing. Shareholders might try to calculate how high their dividend will be.
When problems arise, financial statements are reviewed. David Eghbali suggested that a "paper trail" could be established by reading these corporate documents; these records help investigators find where the money went.
What is the Key to Unlocking the Secrets of Financial Statements?
#UnlockFinancialSecrets
When I considered these topics, I became quite overwhelmed. I did not know how I could memorize all of the numbers. Thankfully, David Eghbali boiled it all down in language that I could understand. David Eghbali said that investors needed to determine what they were looking for.
I am looking for the company offering the best return on investment (ROI). For this purpose, David Eghbali said I should concentrate on the balance sheet, income statement and cash flow statement. He asked me about my risk tolerance. I asked "What is risk tolerance?"
Risk Tolerance Explained
#RiskTolerance
I sat attentive to what David Eghbali said next. He described how each investor had his own personal investing goals. He might want to earn a certain amount of money each year. All investments have some risk associated with them, David Eghbali opined. He said that you should find an investment that properly fits your own personal risk tolerance. Risk tolerance is "How much risk you can handle in your financial portfolio." Sometimes, this risk tolerance changes.
Adjusting Your Financial Portfolio
#FinancialPortfolio
Financial analysts can help individuals adjust their portfolios over time. The blue-chip stocks are considered to be the most well-known brands in the world. I must remember that "past performance is not an indicator of future performance" warned David Eghbali. Each year, I might want to review how well my stocks performed and make adjustments to my portfolio to optimize my returns.
What do successful investors search for in the financial statement?
#WhatToLookFor
I finally felt prepared to search the financial statements of about ten companies, I was considering. These were all well-established blue-chip brands - I wanted to be conservative. I learned that financial statements should be viewed over a long term period of time. Companies will forecast future earnings; if you compare their predictions to their actual results, you can gauge the quality of their management team.
A good Chief Executive Officer (CEO) can create a more profitable firm due to his drive, energy and passion. He might have developed strong business contacts. The financial statements even included messages directly from the CEO.
David Eghbali
The goal of this article is to break down the financial statement categories in more detail. EBITDA, EPS and GAAP are clearly defined. It is important that investors compare these different financial figures year-to-year to determine if the company is making its forecasts. Wall Street analysts cover the top businesses and regularly report on how they are faring.