Study Charlie Munger:
The Income Statement Explained Simply:
If you invest, you must learn how to read a balance sheet I always focus on: Cash & eqiv Inventory (if applicable) All debts
How to calculate 7 common valuation ratios: 📈 1. Price-to-Sales ratio (P/S ratio) ➗ Market Capitalization divided by Sales 2. Price-to-gross profit ratio…
Balance Sheet Synonyms Balance Sheets do not have a universal layout. That's because management teams control the terms and categories they use in their…
14 Profit Ratios every investor should know: 💸 Accounting is the language of business. Level up your business & investing skills by memorizing these ratios:… | 23 comments on LinkedIn
Financial Statement Yellow Flags 🇳🇺 Watch for these warning signs when analyzing financial statements: 💰 INCOME STATEMENT → Sudden slowdown in revenue… | 33 comments on LinkedIn
Business Yellow Flags 🇳🇺 Watch for these 6 warning signs: 🇳🇺 DELCINING MARKET SHARE: → If a competitor is growing much faster than your business –… | 25 comments on LinkedIn
Warren Buffett's Investing Checklist: “No wise pilot, no matter how great his talent and experience, fails to use his checklist.” - Charlie… | 87 comments on LinkedIn
6 Depreciation Methods Credits to Brian Feroldi, follow him for more finance content. ------ Here's the original post: 6 Depreciation Methods, Explained…
Margin vs. Markup Knowing the difference can improve profits! —— 📚 Grab my FREE accounting infographic ebook: → https://lnkd.in/geciS9nM —— To calculate… | 16 comments on LinkedIn
Liquidity vs Solvency: What's the Difference? 📚 Grab my FREE accounting infographic ebook: 🔗 → https://lnkd.in/geciS9nM Understanding the difference is crucial for analyzing a company's financial health. While both concepts are related to a company's ability to meet its obligations, the terms mean different things: Liquidity 📊 Liquidity refers to a company's ability to cover its short-term obligations using its most liquid assets. This is important because a company with poor liquidity may struggle to meet immediate expenses, even if it is otherwise profitable. Here are some key indicators of liquidity: Current Ratio 📊 • Measures a company’s ability to pay its short-term liabilities with its short-term assets. • Formula: Current Assets / Current Liabilities • Interpretation: A ratio >1 indicates that a company can cover its short-term debts. Quick Ratio 📊 • Similar to the current ratio, but excludes inventory since it may not be easily convertible into cash. • Formula: (Current Assets - Inventory) / Current Liabilities • Interpretation: A ratio >1 indicates that a company can cover its short-term debts. Companies with strong liquidity can handle short-term disruptions, but liquidity alone doesn't tell the full story. Solvency 🏦 Measures of a company's ability to meet long-term obligations. A company can be liquid but still insolvent if it lacks the capacity to pay its long-term debts. Solvency focuses on the overall financial stability and longevity of a business. Key solvency metrics include: Debt-to-Equity Ratio 📊 • Compares total debt to shareholders' equity. It helps assess how leveraged a company is. • Formula: Total Liabilities / Shareholders' Equity • Interpretation: A ratio >1 indicates the company can is financed with more debt than equity. A ratio <1 indicates the company can is financed with more equity than debt. Interest Coverage Ratio📊 • Shows how easily a company can pay interest on its outstanding debt. • Interest Coverage Ratio = EBIT / Interest Expense Total Debt Ratio 📊 • Measures the proportion of a company’s assets that are financed by debt. • Total Debt Ratio = Total Liabilities / Total Assets A company with strong solvency has a solid foundation for long-term growth, even if its liquidity is temporarily weak. The Bottom Line 📌 Liquidity is about surviving in the short term. Solvency is about thriving in the long term. A well-run company needs both. Follow Brian Feroldi for more content like this. If you found this post useful, please repost ♻️ to share with your audience.
HOW TO ANALYZE A BALANCE SHEET 📚 Grab my FREE accounting infographic ebook: 🔗 → https://lnkd.in/geciS9nM ⚖ What is a balance sheet? A balance sheet shows you what a company OWNS and OWES. It's like a company's "Net Worth" statement. 🔢 Balance Sheet Formula: Assets = Liabilities + Shareholders Equity 📸 Balance Sheet = Snapshot Balance sheet = snapshot -> at a certain point in time 💰 Assets: What the company OWNS Two categories of assets: → Current Assets: Assets that are expected to be used in <1 year. → Non-current assets: Assets that are expected to be used in >1 year. 💳 Liabilities: What the company OWES Two categories of assets: → Current Liabilities: an obligation due in <1 year → Long-Term Liabilities: an obligation due in >1 year 🤑 Shareholders Equity: A company's NET WORTH. →The dollar amount that would be returned to shareholders in the company was liquidated. 🔎 Balance Sheet Analysis: ❓ Questions: 1: How much CASH does the company have? 2: Are there any ACCOUNTS RECEIVABLE? 3: Is there any GOODWILL? How much? 4: What are the biggest liabilities? 5: Does the company have any DEBT? What kind? 6: Is there any PREFFERED STOCK? 7: Are RETAINED EARNINGS positive? Is it growing? 8: Is there any TREASURY STOCK? 🇳🇺 YELLOW FLAGS 1: CASH & CASH EQUIVALENTS → Less Than Total Debt 2: ACCOUNTS RECEIVABLE → Rising Faster Than Revenue 3: INVENTORY → Rising Faster Than Profits 4: GOODWILL → More Than 50% of Total Assets 5: INTANGIBLE ASSETS → More Than 50% of Total Assets 6: SHORT-TERM & LONG-TERM DEBT → More Than Cash 7: PREFERRED STOCK → There Shouldn’t Be Any 8: RETAINED EARNINGS → A Negative Number Follow Brian Feroldi for more content like this. If you found this post useful, please repost ♻️ to share with your audience. | 56 comments on LinkedIn
10 Ways to Measure Profit Credits to Brian Feroldi, follow him for more practical insights. ------ Here's the original post: 10 Ways To Measure Profit Not…
How to analyze a Cash Flow Statement in <2 minutes: Understand these cash flow formulas. The Cash Flow Statement shows a company's profitability at multiple… | 10 comments on LinkedIn
Cash Flow Statement 101 Follow @BrianFeroldi for more content like this. Like visuals? Grab a FREE copy of my accounting infographic ebook (link in bio). The cash flow statement tracks cash movements in and out of a business. It provides critical information about a company's liquidity, solvency, and financial flexibility. The cash flow statement reconciles the beginning and ending balances of cash over an accounting period. Cash Flow Statements have three major sectors: • Operating A...
