Analyze A Common Size Balance Sheet, Income Statement and Other Financial Statements – Common Size Analysis
What is the Difference Between a Common Size Balance Sheet and a Regular Balance Sheet?
Common Size Analysis of Financial Statements involves looking at the numbers on the financial statement as a percentage of a total rather than their absolute value. Typically investors will look at a company’s common size balance sheet and common size income statement.
This is helpful when not only looking at a single company’s financial statements, but also comparing multiple business of different sizes at one time. Let’s take a look at an example of a normal balance sheet and a common size balance sheet for several companies:
The first step in finding potential investment opportunities is to be able to go through and evaluate a company’s financial reports. In this article we evaluate the Cash Flow Statement, one of the most useful of the three financial statements.
Investing Based on a Company’s Net Income is Probably Not the Best Idea
It’s earnings season again, which means you are probably staring at a company or two in your portfolio that have seen their share price take a dive after reporting “disappointing” earnings.
You are not alone.
Here was the news the other morning after Warren Buffett’s Berkshire Hathaway reported earnings:
Sounds bad right? Profit (Net Income) is down by a sizeable margin year over year for Berkshire.
Does this mean it is time to say goodbye to the all-star investor?
From those headlines it may seem so. But there is a lot more to a company’s financials than that headline earnings number. (Read to the end and find out how Buffett really measures the success of his businesses.) [continue reading…]