What about the financial statements?
Usually, the three statements we refer to refer to are balance sheet, income statement and cash flow statement. Their details are as follows:
1 balance sheet: it is a report that reflects the financial situation of an enterprise on a specific date, from which we can see the quantity and nature of the assets of this enterprise, from which we can know what the main source of income is, and roughly judge the stability of income.
The liabilities in the balance sheet can also show us the ability of the enterprise to repay its debts within a period of time and whether there is a risk of default. However, the lower the debt, the better. High debt means that the company can use the money of suppliers or customers for free, which is the performance of the company's strong competitiveness. Therefore, the debt ratio should not be too low or too high, and it is better to control it within a certain reasonable range.
The greater the total assets of a company, the richer the resources it can master, reflecting its strength, and the "leading" advantage that everyone pursues can be reflected.
2 Income statement: refers to the statement reflecting the operating results of an enterprise in a certain accounting period, which is mainly based on "income-expense = profit". Through the income statement, we can roughly evaluate the company's operating performance and operating costs. And understand the company's profitability and capital utilization, so as to judge its investment value. Under normal circumstances, companies in a virtuous circle will increase R&D expenses to reduce production and operation costs and increase income.
Cash flow statement: a statement reflecting the inflow and outflow of cash and cash equivalents in a certain accounting period, which is divided into three categories according to purposes: operation, investment and financing.
Under normal circumstances, if the calculation result of the net cash flow (CFO) generated by operating activities is negative, it means that the cash income generated by the operation of the enterprise cannot offset the related expenses, and there are operational difficulties. Looking at the ratio of actual cash to current liabilities, we can roughly analyze the short-term solvency of enterprises and whether there is a risk of capital chain breakage.
Generally speaking, the operating conditions of a company can be reflected by these three statements. When investing in stocks, we often say that stock selection means choosing a good company, so choosing a good company depends on financial statements. Therefore, learning to analyze financial statements can greatly reduce our economic losses and avoid "stepping on thunder".