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Analyzing Financial Statements

Analyzing Financial Statements
This topic could be and is a full semester course at some business schools. It is a deep and rich topic that I can’t cover in one single blog post. But it is also a relatively narrow skill set at its most developed levels. If you are going to be a public equity analyst, you need to understand this stuff cold and this post will not get you there. But if you are an entrepreneur being handed financial statements from your bookkeeper or accountant or controller, then you need to be able to understand them and I’d like this post to help you do that. I’d also like this post help those of you who want to be more confident buying, holding, and selling public stocks. In the past three weeks, we talked about the three main financial statements, the Income Statement, the Balance Sheet, and the Cash Flow Statement. In general, I like to start with cash. Then look at how much cash the business had in a prior period. If cash flow is positive for all periods, then you are done with cash.

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Why You’re Paying Too Much in Fees Image Credit: Christophe Vorlet By Jason Zweig | 1:01 pm ET June 19, 2015 The way financial advisors charge for their advice often makes no sense, and it needs to change. Understanding Accounts - Basic Finance for Non-Financial Managers - Career Development from MindTools Basic Finance for Non-Financial Managers Knowing your way around a spreadsheet can help your career. © iStockphoto/leventince It's not just accountancy specialists who deal with spreadsheets, and figures, and the financial side of business. It's highly likely that, as a line manager or department head, you're going to have to analyze a spreadsheet at some point, or have some form of financial recording to do as part of your job description. How to Value a Stock with Benjamin Graham’s Formula How to value stocks series For other posts in the series, follow the links below. Quick Word on the Science and Art of Valuation

Burn Rate as the Canonical Mistake (for Web Startups) - Continua Burn Rate as the Canonical Mistake (for Web Startups) One of the all time great opening lines is from Tolstoy’s Anna Karenina: Happy families are all alike; every unhappy family is unhappy in its own way. Mind Fees in Your Withdrawal Rate Retirees should be aware of how costs can eat into their portfolio balances, and consider making withdrawal adjustments every year, says Morningstar's David Blanchett. How to set a sustainable withdrawal rate is a crucial topic for retirees. With bond yields as low as they are, a recent study by David Blanchett, Michael Finke, and Wade Pfau suggests that a 3% withdrawal rate--rather than the so-called 4% rule--will help improve retirees' probability of success. Click here to read the paper in its entirety.

Organizations need to embrace ‘spend optimisation’ They can become empowered to not only cut their costs but also enhance profitability Enterprises are increasingly coming under pressure to make valuable use of their available resources, yet a complaint I hear time and time again is that different departments across the organisation are failing to collaborate on spending. There are myriad reasons for this failure to collaborate, but the most common ones tend to be a lack of formal travel and expense policies, a belief that procurement is too slow or hard to deal with, the existence of disparate systems that aren’t integrated to bring information into context, and a preference for working directly with vendors with which the buyer is already comfortable. ‘Spend optimisation’ is the process by which an enterprise establishes policies, procedures, and controls and gains visibility to ensure that its workforce is spending its resources wisely. It is also important that spend optimisation is not viewed by employees as a negative.

Research and Valuation Process How to Invest in the Stock Market: Part 1 | Part 2 | Part 3 | Part 4 | Part 5 Here is the process I follow which is rooted in the Graham and Dodd approach: Search I usually scan for ideas reading print media such as the Wall Street Journal, Barrons, and websites such as Google Finance and blogs looking at 52-wk lows lists looking for headlines that just spell “bad news” and articles that may lead to ideas with catalysts, event driven ideas and sometimes macro-event driven ideas.

When it Makes Sense to INCREASE the Burn Rate « VCMike's Blog I was in a board meeting earlier this week of a portfolio company that appears to be in the early phases of a very encouraging ramp, both in terms of users and in terms of revenue. Our CEO is torn between investing in growth, and burning some more of the precious capital we have in the bank, versus focusing on getting to profitability and then investing in growth. So, the question came up, should we manage expenses to make sure we are closing the gap toward profitability? The answer the board gave was “it depends.”