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Financial Statement Analysis

(Balance Sheet) Balance sheet is a kind of financial term, which is calculated based on some time duration like quarterly or half yearly or annually.
It contains assets, liabilities, debt, and equity capital of the company. Balance sheets include assets in one side and liabilities in other sides.

Simply formula of balance sheet is Assets = Liability + Shareholder’s Equity.
Assets: – In simply term anything gives money to your pocket in regular basis.
Liability: – In simply term anything takes money from your pocket in regular basis.

(Profit and Loss Account) Profit and loss account is a financial term, which is calculated by certain period of time like quarterly or yearly.

It contains incomes and gains are credited and expenses and losses debited. So it shows net profit or loss for certain period of time.

If result come as net profit means company is growing and direction of growth is upwards, otherwise company growth reduced in the given period of time.

(Stock market related ratios) Some basic ratio need to follow before taking any stock or before entering into trade.

  • If trading for intraday, then revert to risk ratio should be 1:2
  • If trading for swing means taking negative risk for 10 to 15 days, then revert to risk ratio should be 1:3

(Simply analysis before entering into stock) Before entering into stock need to follow some simple analysis is given below, this increases the probability to success in the stock market.

  1. Need to decide your trading period means you are planning for long term or medium term or intraday trading.
  2. First choose a fundamentally good stock for buy or weak stock for sell.
  3. Look the opportunity to take the trade as per technical analysis.
  4. Decide your risk taking capacity and based upon than take your trade.
  5. Use stop loss and trailing stop loss to protect your capital and profit respectively.

(Understanding of annual report) It is a kind of report, company submitted to Securities and Exchange Commission on every year.
Through this report, company’s shareholders see the company result or performance for this year.
The report contains the following thing mention below.

  • Vision and mission statement of the company.
  • Corporate information
  • Products overview and financial highlights in last 5 to 10 year
  • Director’s report
  • Management discussion and analysis (MDA)
  • Report on Corporate governance
  • Information on shares of the company
  • Auditors report
  • Financial statements
  • Notes to accounts

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