Financial Statements

🏛️

Assets

What company owns: current assets (cash, inventory) + fixed assets (property, equipment)

💡 Higher quality assets = stronger company

💳

Liabilities

What company owes: current liabilities (short-term debt) + long-term debt

💡 Lower debt-to-equity ratio preferred

💼

Equity (Net Worth)

Shareholders' equity = Assets - Liabilities. Book value of company.

💡 Growing equity indicates healthy business

⚙️

Working Capital

Current Assets - Current Liabilities. Operational liquidity measure.

💡 Positive working capital essential for operations

✨

Intangible Assets

Patents, trademarks, goodwill. Not physical but valuable.

💡 Check if goodwill is inflated from acquisitions

⚠️

Contingent Liabilities

Potential liabilities (lawsuits, guarantees). Read footnotes.

💡 Hidden risks that may materialize

💰

Revenue (Top Line)

Total income from operations. Most important number.

💡 Look for consistent revenue growth YoY

💸

Operating Expenses

COGS, employee costs, R&D, SG&A. Check if controlled.

💡 Efficiency improves when expenses grow slower than revenue

📊

EBITDA

Earnings before interest, tax, depreciation, amortization. Operating profitability.

💡 Compare with competitors in same sector

💹

Operating Profit (EBIT)

Profit from core business before interest and tax.

💡 Core business profitability indicator

🎯

Net Profit (Bottom Line)

Final profit after all expenses, interest, and tax.

💡 PAT growth + margins crucial for valuation

📈

EPS (Earnings Per Share)

Net Profit / Outstanding Shares. Most watched metric.

💡 Growing EPS drives stock price appreciation

💵

Operating Cash Flow

Cash generated from core business operations. Most important.

💡 Should be positive and growing. Better than net profit.

🏗️

Investing Cash Flow

Cash spent on capex, investments, acquisitions. Usually negative.

💡 Heavy capex may limit free cash flow

🏦

Financing Cash Flow

Cash from debt/equity issuance or dividends paid.

💡 Check if company raising debt frequently

👑

Free Cash Flow (FCF)

Operating Cash Flow - Capital Expenditure. King metric.

💡 Used for dividends, buybacks, debt repayment

🔄

Cash Conversion Cycle

Days from paying suppliers to receiving from customers.

💡 Lower is better. Negative cycle is excellent (Amazon)

💎

Dividend Coverage

FCF / Dividends Paid. Can company sustain dividends?

💡 Ratio > 1.5 indicates safe dividend

📚

Start with Annual Reports

Read last 3-5 years annual reports. Management discussion and analysis (MD&A) section crucial.

📈

Check Trends, Not Absolutes

Don't focus on single year. Look at 5-year trends for revenue, profit, margins.

⚖️

Compare with Competitors

Relative comparison more important. Check industry averages on Screener.in.

🔍

Read Footnotes & Disclaimers

Devil is in the details. Related party transactions, contingent liabilities.