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:

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Evaluating Financial Statements – Cash Flow Statement

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.

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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:

 

brk_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…]