Financial Statements Reveal Durable Company

Financial statement can reveal whether the company that we interested in will generate money to us consistently. When we looking in the financial statement, we looking on the “consistency”. Will this company able to generate income with high gross margin consistently? Will this company able to maintain the expenses consistently. Will this company able to generate the earnings consistently?

This consistency is important to us for long term investment.

When we look into the financial statement, there always have 3 statement which named as income statement, balance sheet and cash flow statement. Each statements provide us important information on the company that we interested in.

Income statement reveal how much the company has earned during its operation. This statement will be released every 3 months period by accountants and the whole fiscal year. Info can be get from this statement are company’s margin, return of equity, its consistency earnings, etc.

Balance sheet reveal how much the company has the money in the bank and how much it’s owes. The net worth of the company can be known after deduct all the debts from their account. The balance sheet was generated every 3 month period which called as quarter and at the end of the accounting or fiscal year.

Lastly, the cash flow statement track the flow of the cash either in or out of the business. We can know how the company spend their capital in their improvements. 

Where we going to start finding the company that will make us rich

The company that will make us rich will always durable and with competitive advantage. These companies always have a unique product or a unique service, low capital or provide services or product that the public will consistently need.

If the products or services have a piece of customer’s mind, customer will never change their mind in changing the product. This will let the company produce more and sell more of their product which can be reflected in the financial statements. There were different kind of services and products being offered by the listed companies. We can find or observe what kind of product or services that normally used by the public within the street, your working area or even in your house.

Would you buy any shares from certain company which provide their services or product that seldom used by public, or even you don’t use it? When the consumer has low intensity to purchase the product or services, the profits generated will be lesser. A company with low profit will hardly or never to issue dividends to shareholders.

Start to find and observe any kind of products or services that always appear around you. Find the company that provide the services or product and run through their financial reports before invest any of your hard earned money.