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mukiha		#21 Posted : Monday, May 03, 2010 1:05:54 PM
Rank: Elder Joined: 6/27/2008 Posts: 4,114		guru267 wrote: Accounts Payable: reflects future costs of the firm Accounts receivable: reflects future income of the firm Long term liabilities: reflects future interest and principal payments the firm has to make Just an example... Will these tell me if the business will be profitable in the future? Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Chaka		#22 Posted : Monday, May 03, 2010 1:46:12 PM
Rank: Elder Joined: 2/16/2007 Posts: 2,114		@guru267, Are you an accountant?In this game I believe it pays to be one.
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kenstat		#23 Posted : Monday, May 03, 2010 1:46:24 PM
Rank: New-farer Joined: 12/31/2009 Posts: 43 Location: Tundra		mukiha wrote: @kenstat: Since 1954; is that young? Young in the sense of corporate governance. I still believe there is significant information that insiders have that most retail investors do not have access to that they use for their own advantage.
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kenstat		#24 Posted : Monday, May 03, 2010 1:51:30 PM
Rank: New-farer Joined: 12/31/2009 Posts: 43 Location: Tundra		guru267 wrote: @kenstat i find it hard to agree with you about the income statement and cash flow statement being more important than the balance sheet when making long term investments although the cashflow and income statement are also important in decision making, they can seriously change even within a year as a result change in economic situation or events whereas the balance sheet gives a long term picture of business operations and sustainabilty... in short the cashflow and income statements are ideal for short term investors but they are exposed to too many variables for me to use them extensively to gauge a company's long term perfomance... Totally disagree. You look at all statements to give you a view of the company in the long run. So if I look at the income statement and cashflow, I look over a period of 5 to 10 years to get a sense of the trends. Looking at one years of ststement and making a decision based on that would be dangerous. BTW, the balance sheet give the picture of the company at a point in time (the date they are published). By the next day, maneno may be totally diffrent from what the balance sheet potrays.Plus these statements are not isolated as we make them sound. What's in the balance sheet captures the activity reflected in the income statement.
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mukiha		#25 Posted : Monday, May 03, 2010 1:55:30 PM
Rank: Elder Joined: 6/27/2008 Posts: 4,114		Chaka wrote: @guru267, Are you an accountant?In this game I believe it pays to be one. Do you imply that the most successful stock investors are mostly accountants? Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Chaka		#26 Posted : Monday, May 03, 2010 1:59:57 PM
Rank: Elder Joined: 2/16/2007 Posts: 2,114		mukiha wrote: Chaka wrote: @guru267, Are you an accountant?In this game I believe it pays to be one. Do you imply that the most successful stock investors are mostly accountants? Not necessarily but I believe they have a head start
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kenstat		#27 Posted : Monday, May 03, 2010 2:00:16 PM
Rank: New-farer Joined: 12/31/2009 Posts: 43 Location: Tundra		mukiha wrote: Financial statements are about the past, not the future. How does one assess the future? If I may... Yes they are about the past but that is a very limited view. They are the only instruments you have that show you how management has perfomed to date. And more likely than not, the same level of perfomance will be maintained in the future unless something changes in management or the market. In terms of sesseing the future, they are a starting point. Based on past financials, you can project the future statement (the brokers should most like ly be doing this and passing the infor to their clients in terms of ratings/recomendations).Bsed on this you can do a discounted cashflow analysis, arrive at a value for the company, compare it to todays value, etc etc etc. Swali, if statements don't matter, what do you base your decisons to invest on?
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tonicasert		#28 Posted : Monday, May 03, 2010 2:05:54 PM
Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi		guru267 wrote: mukiha wrote: Financial statements are about the past, not the future. How does one assess the future? you are exactly right about financial statements reflecting the past... the only one with access to some future aspects is the balance sheet.... Accounts Payable: reflects future costs of the firm Accounts receivable: reflects future income of the firm Long term liabilities: reflects future interest and principal payments the firm has to make Just an example... From my little accounting knowledge, accounts payable and receivables are just debts and amts due to creditors in future for transactions already done in the current financial period, and the P&L accrued, and hence do not reflect future income/costs. Nways, I think with NSE, the bigger macro-environment is more important to look at in making a fundamental analysis > Eg. cheap imports from China & Taiwan will undercut business for Firestone, hence the expected future income is low = lower share price; Safaricom facing additional comepetion, but still having a strong holding and expanding product line = stable to stronger share price etc. Note: a low P/E could either mean: - The share price is undervalued, and it may be a good pick. - Markets have priced in low future income expectations, hence the lower price and P/E. my 2cts...
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mukiha		#29 Posted : Monday, May 03, 2010 2:17:56 PM
Rank: Elder Joined: 6/27/2008 Posts: 4,114		kenstat wrote: Swali, if statements don't matter, what do you base your decisons to invest on? Do you mean that financial statements are the only way to assess a prospective stock for investment? Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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mukiha		#30 Posted : Monday, May 03, 2010 2:20:29 PM
Rank: Elder Joined: 6/27/2008 Posts: 4,114		tonicasert wrote: I think with NSE, the bigger macro-environment is more important to look at in making a fundamental analysis > Eg. cheap imports from China & Taiwan will undercut business for Firestone, hence the expected future income is low Does this not apply in developed countries? Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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