Tuesday, October 18, 2011
Balance sheets are a crucial source of information for stock investors. Balance sheets help in determining the financial health of a company and their analysis should be a large component of one’s stock screening and selection methodology, even for the novice investor. The balance sheet, which is the cornerstone of a company’s financial statement, reveals information about the company’s assets, liabilities and its net worth or equity. These three segments tell the investor what the company owes and owns as well as the amount that the shareholders have invested at any given point of time. For these reasons, it is necessary for a value investor to learn the basics of balance sheet analysis and to invest only in companies that have strong balance sheets.