Many investors don’t care for reading financial statements because they are used to following trends. They will “pump and dump” into stocks to make money before the markets close. However, other investors make most of their wealth by investigating the companies first and reading their financial statements.
You can read a company’s financial statement on several websites; MSNMoney.com, Stocktwits.com, Yahoo!Finance.com, or the Security Exchange Commission (SEC).com. Some website’s information may not always be accurate, but the SEC is where businesses are required to submit their 10Q and 10K information- the 10Qs are quarterly statements and 10Ks are annual statements.
There are three major parts to the financial statement: the Income Statment, Balance Sheet, and Cash Flow Statement. Here you can find operating expenses, total revenue, company budgets, gross profit and more. Many investors use a formula to find specific calculations that may be a contributing factor to whether they want to make the initial investment or not. There are hundreds of formulas to use, but one of the most commonly used formulas is the Profit-Gross Margin formula (Gross Profit ÷ Revenue= % Gross Profit Margin).
Business moguls, such as Warren Buffett, understand the importance of reading financial statements. Money management can make or break any billion dollar corporation and if you’re investing in a company and you don’t know what kind revenue they are bringing home, stop what your doing now and read it! If you read the company’s shareholder reports (on their website), they are usually dressed up and sometimes have useless information. Find a website that has simple information you can read from to get what you need.