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Discussion Starter #1 (Edited)
Hey everyone,
So, seeing as Idm interested in investing and if I do eventually end up investing in both individual stocks AND ETFs (You never know) I think it would be very helpful if I knew how to properly read financial statements. Now I know generally what some items are on a statement but many of them I still do not understand and am interested in picking up a book or two to help me out with this.

My problem is there are so many books out there I have no idea which one would be decent to get a general understanding of a Financial Statement and which ones are bad :p. Please note I am also interested in online resources if they are just as good or better for helping understand these complicated items.

Does anyone have any specific recommendations?

I do have my eye on this one:http://www.amazon.ca/Financial-Statement-Analysis-Valuation-Approach/dp/0130328340/ref=sr_1_10?ie=UTF8&qid=1287727261&sr=8-10

I know investopedia has some resources on this topic but I dont really like reading through all their ads etc, it make it really hard to concentrate on what they are talking about. Although if the resource is decent I may consider revisiting it...

EDIT: Just to let people know I really honestly dont want to read an 400+ page book on financial analysis, I am moreso interested in just a general understanding of terms used in it to see how well a company is fairing etc etc.

Thanks to anyone that helps!
 

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Hi Jamie, this thread is very familiar to me. I asked very similar questions when I started to get more serious about investing a few months ago. I'm FAR from being any kind of reliable authority on a lot of this stuff, but at least now I have a basic understanding that I did not have before. And I still have a LOT to learn.

At that time, I started a few threads that gathered some valuable responses. I think you should bookmark these threads and take the time to read through them. It will probably take 30 minutes of your time to read all the pages and glean valuable info, but I think you would enjoy the reading and beginner level questions and answers. Hope this helps.

How to read my statements

Investing in low-cost ETFs via a discount online brokerage.

In-person training course thread. May or may not be of interest to you.
 

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You don't want to waste time reading a 400 pg book and want great solid info.

Stop investing right now you are in for a world of hurt.

This is a subject that I've studied for 25 years and plan on another 25 years of study. Even pro's that went to school to study investment are still learning because the game changes every time.
 

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Also you have to appreciate that a financial statement is a work of art created for auditors and investors. While it will fill you in on the basics about a company, the Enron and Goldman Sacks manipulations makes such statements very misleading.
 

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While I think more financial literacy is a good thing, the idea that reading a few books about financial reporting will make you a better investor is doubtful. I am a CA, MBA, and CFA and I don't even try to read financial statements. This is after a career preparing and presenting these statements. They are so complex and summarized it takes a full time analyst with many other sources of information to get a good understanding of a particular business. It is more useful to read the companies quarterly presentations along with analyst reports. To think that you could get some unique perspective by reading F/S that the rest of the market has missed is highly unlikely. Much more likely you would screw up and make a mistake.
 

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Discussion Starter #6
Ah so I guess they are too complicated then eh? Honestly its not that I DONT want to read a 400 page book its based on the fact that I would prefer just to have a general understanding on some of the terms used in a financial statement...

I dont exactly have to understand everything about it....honestly it would just be nice to be able to derive whether a company is in debt, whether they have cash flow and/or whether they are profiting.

Now I dont find it encouraging that some of previous posters just say "dont even bother". Now the fact is that I am young, bored and with nothing to do....yes I may not understand EVERY aspect of a financial statement...Like I said in my OP, I want a GENERAL understanding of them...whether that be understanding a few of the terms used etc etc. I know that this things are complicated and so complex barely anyone understands them....but do you atleast know when you look at a statement to be able to say "This company is profiting" or "This company has so much debt its a goner". If you cant even do that then why are you sitll in the job? Just sayin....thats all I really want to even ATTEMPT to understand.
 

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Take a basic accounting course at the local college. This should give you what you are looking for. I'm retired after spending 35 years in finance/accounting. As long as you are only looking for basic background knowledge and don't think this will give you some leg up on the market you will be OK.
 

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Discussion Starter #8
My intention wasnt necisarily to spot amazing "hidden gems" or whatever but it would be nice to know if a company is either failing or doing well before I invest in them :D. That was really my main reason for wanting a general understanding.
 

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With all respect to some posters above, I believe that knowing how to read a balance sheet is important to fundelmental analysis when you are investing money in a companies stock. If they company is in the dumps, it helps to know this before you put money into it. To achieve a good solid growth company where you can share profit, you should look for several things such as positive ROE, lowering debt, increasing revenue, etc. Of course you will have no clue on how to do this, unless you can read a balance sheet.

I just read this book not to long ago called "how to read a balance sheet" by Rick Makoujy. I recommend it for you, I thought it was a great book. You can probabely get it at your local library. (If they have librarys in collingwood. :p )
 

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I defy any intelligent person to read and understand a set of F/S issued by a bank, insurance co, or any company that uses complex hedging or other financial engineering products. This includes many of our larger Canadian companies. I don't want to discourage more financial literacy-just a sense of misplaced confidence that could cost you. Reading a simple set of F/S is a good objective but I doubt it would improve your investment returns in any event.
 

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Discussion Starter #12
I understand that Square Root, but like I said before....I would prefer to know if a company has much debt or is in profit etc before I invest in it. Honestly everyone has gone overboard with the question. All i asked for was a "General understanding" I guess I should have said "Simple understanding of simple financial statements"? lawl.

Anyways thanks for the help everyone.
 
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