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Financial Statements

Master the three core financial statements — balance sheet, P&L, and cash flow statement — to understand any company's true financial health.

What Is Retained Earnings on a Balance Sheet? Retained earnings are the profit a company keeps after paying out dividends to its shareholders. This money is held by the busines… 5 min read
How to Assess a Company's Liquidity from Its Balance Sheet To assess a company's liquidity, you need to read its balance sheet and calculate key ratios like the Current Ratio and Quick Rati… 5 min read
Tangible vs Intangible Assets — What Do They Mean on a Balance Sheet? Tangible assets have a physical form, like buildings or cash, and are easy to value. Intangible assets are non-physical, such as p… 5 min read
Why Some Companies Show Zero Debt but Are Still Heavily Leveraged A company can show zero debt on its balance sheet by using off-balance-sheet financing, such as operating leases or special purpos… 5 min read
Documents Needed to Fully Analyze a Company's Balance Sheet To fully analyze a company's balance sheet, you need more than just the balance sheet itself. The key documents include the income… 5 min read
Balance Sheet Red Flags Checklist for Indian Stock Investors Reading a company's balance sheet can reveal serious problems, or 'red flags', before they impact the stock price. This checklist … 5 min read
Operating Profit vs Total Profit — Why the Gap Matters Operating profit shows how well a company runs its core business, while total profit (net profit) reveals the final money left aft… 5 min read
Why Changing Depreciation Policy Can Boost Reported Profits Artificially A company can boost reported profits by changing its depreciation policy, such as extending an asset's useful life or increasing i… 5 min read
Is EBITDA the Best Profit Metric for Evaluating Companies? EBITDA is not the best profit metric because it ignores crucial real-world costs like taxes and the replacement of aging assets. A… 5 min read
Income Statement Analysis for Long-Term Investors in India Learning how to read financial statements is simpler than you think. For a long-term investor in India, the income statement revea… 5 min read
Understanding a P&L Account as a Fresher Investing in Stocks The Profit and Loss (P&L) account, or income statement, is a financial report that shows a company's revenues and expenses over a … 5 min read
What Is Minority Interest in a Consolidated P&L? Minority interest is the part of a subsidiary's profit and net assets that belongs to outside shareholders, not the parent. It app… 5 min read
What Is a Cash Flow Statement? A cash flow statement shows you exactly where a company's money came from and where it went over a period. It is crucial because e… 5 min read
What Is the Difference Between Direct and Indirect Cash Flow Method? The direct cash flow method lists actual cash receipts and payments from operations, such as cash from customers. In contrast, the… 5 min read
What Are Non-Cash Items in a Cash Flow Statement? Non-cash items on a cash flow statement are revenues and expenses on the income statement that do not involve an actual exchange o… 5 min read
How to Calculate Free Cash Flow from Financial Statements Free cash flow equals operating cash flow minus capital expenditure — both found in the cash flow statement, not the income statem… 5 min read
How to Analyze Cash Conversion of Reported Profits Analyzing cash conversion of reported profits involves calculating the Cash Conversion Ratio, which is Cash Flow from Operations d… 5 min read
Operating Cash Flow vs Free Cash Flow — Which Tells More? Operating Cash Flow (OCF) shows a company's ability to generate cash from its main business activities. However, Free Cash Flow (F… 5 min read
Is Free Cash Flow Always Better Than Net Profit as a Metric? Free cash flow is harder to fake than net profit and better for valuation. But net profit captures long-term economic reality that… 5 min read
How Much Capex Should a Company Spend Relative to Revenue? There is no universal capex-to-revenue ratio. Software firms spend 2 to 6 percent, telecom 15 to 25, and utilities up to 30 percen… 6 min read
How to Read Notes to Accounts for Hidden Financial Information The key to finding hidden information in a company's finances is to read the Notes to Accounts. This section explains the accounti… 5 min read
How to Download Annual Reports of Indian Listed Companies You can download annual reports of Indian listed companies for free from BSE, NSE, company websites, and SEBI filings. These repor… 5 min read
Is CARO Qualification Always a Serious Concern for Investors? A CARO qualification is not always a serious concern for investors, but it always requires investigation. Instead of being an auto… 5 min read
Documents Needed to Fully Evaluate an Indian Company's Annual Report To fully evaluate an Indian company's annual report, read 10 specific documents in order — auditor's report, financial statements,… 5 min read
Annual Report Analysis for Long-Term Buy-and-Hold Investors As a buy-and-hold investor, an annual report is your best tool for finding strong companies. Learning how to read financial statem… 5 min read
What Is Depreciation Policy and Why Does It Matter for Investors? A depreciation policy is a company's chosen method for spreading the cost of a tangible asset over its useful life. It matters to … 5 min read
What Is Ind AS and How Does It Differ from Old Indian GAAP? Ind AS, or Indian Accounting Standards, are the accounting rules used by companies in India, which are mostly aligned with interna… 5 min read
What Is the Linkage Between Balance Sheet P&L and Cash Flow? The Profit and Loss statement shows a company's profitability, while the Cash Flow Statement tracks its actual cash movements. The… 5 min read
How to Do a Basic Financial Statement Analysis of an Indian Company To do a basic financial statement analysis, you must first find the company's Balance Sheet, P&L Statement, and Cash Flow Statemen… 5 min read
Financial Statement Red Flags Checklist for Indian Retail Investors Learning how to read financial statements is your best defense against bad investments. Use this checklist to spot major red flags… 5 min read
What Is a Common-Size Income Statement and How to Build One? A common-size income statement is a financial report that shows each line item as a percentage of total revenue. This format allow… 5 min read