Financial Statements Archives | Value Investing - Business and Economic Principles

Value Investing – Financial Statements (Lesson 10)

Phase I - Four Core Principles of Value Investing, Lessons/Tutorials/Resources / By David J Hoare MSA / 12/16/2020 02/18/2022

To comprehend financial information, first the member must understand their general purpose and how they are prepared. The first section of this lesson introduces financial statements and their two primary purposes. In addition, pertinent issues are introduced that a company must endure to finally present a well prepared set of reports. Next, each of the five major types of financial statements are introduced. Most companies present a core set of five that include a 1) balance sheet, 2) income statement, 3) cash flows statement, 4) statement of retained earnings, and 5) a set of notes to clarify the four other statements. Some go further and present industry and highly customized financial reports. These are covered in Phase Two of this program along with the Pool’s information center that members have access to on this website. Finally, this lesson covers the importance of a few key bits of information and how these critical financial values impact the respective buy/sell models value investors develop.

Many stock market investors are not familiar with financial reports; they rely on accountants to provide the results in laymen’s terms in order to make decisions. This program is designed to build the confidence of non-accountant types to not only understand financial reports but to appreciate and ultimately, eagerly await their arrival each quarter. Again, Phase Two of this program goes in-depth about financial statements and how to interpret the information.

This lesson utilizes the financial reports as presented for the year 2019 from the Coca-Cola company. Coke is a DOW company and is considered one of the best stocks to own if you can purchase the stock at a good price. Coke is a dividend based purchase and often buyers purchase Coca-Cola stock to hold and receive dividends.

Bookkeeping – Controls in Accounting (Lesson 95)

Advanced Bookkeeping / By David J Hoare MSA / 07/02/2018 02/18/2022

Just as manufacturing uses controls to ensure quality of product, controls are used in accounting to generate accurate information, maintain security over assets and comply with Generally Accepted Accounting Standards. The company implements various controls to assure accurate and timely information.

Working Trial Balance

Accounting Concepts and Principles / By David J Hoare MSA / 02/18/2017 02/25/2022

The accounting profession uses various tools to generate accurate accounting information at the close of accounting cycles (monthly, quarterly and annually). The primary document is the working trial balance. It is very similar to the traditional trial balance except there are additional columns used to identify various adjustments and the corresponding source documents (work papers).

Bookkeeping – Accounting Cycles (Lesson 29)

Bookkeeping - Regular Business Activity / By David J Hoare MSA / 01/29/2017 02/15/2022

The bookkeeping cycle is like a huge giant clock with several dozen gears from a multiple cog gear rotating the most frequently turning cog cascading into the one large gear that once turned changes the timer one year forward. The bookkeeper’s job is to make all the gears click and keep the system lubricated. At the end of the year, hopefully the final gear moves one click on time and the process starts all over.

Profit and Loss Statement Using Class Accounting

Report Analysis - How to Read the Statements / By David J Hoare MSA / 09/27/2015 02/25/2022

Class accounting breaks down sales and the associated cost of sales into functional groups. Whether you use divisions or departments or product/service lines class accounting allows you to identify those more profitable areas of operations. This is just one of the many different financial reports used in small business.

Bookkeeping – Financial Statement Relationships (Lesson 9)

Bookkeeping - Introduction and Basic Understanding / By David J Hoare MSA / 08/20/2015 02/13/2022

The financial statement reports illustrate changes in the businesses’ financial condition over time. Just as man has evolved, a business grows over time. Naturally, most small businesses want to be highly successful and the reports are issued to evaluate change.

Financial Statements for the Small Business

Report Analysis - How to Read the Statements / By David J Hoare MSA / 07/02/2015 02/25/2022

Financial statements serve the purpose of presenting economic activity and status related to a particular date and over a particular time frame. Accountants record monetary transactions and via financial reports present the information in an easy to understand format. The financial statements for a small business do not have to comply with those of publicly traded operations.

Restaurant Profit and Loss Statement – Best Format to Use

Food Service Industry / By David J Hoare MSA / 01/19/2015 02/27/2022

A well organized and understandable restaurant profit and loss statement can provide infinite value to a restaurant owner. The best format to use allows the owner to understand his prime costs, total variable costs and the required contribution number necessary to cover fixed costs and desired profit.

Variable Costs

Terminology / By David J Hoare MSA / 10/14/2014 02/27/2022

Variable costs are those business related expenditures that vary in proportion to production. The most common examples of variable costs include raw materials, labor, packaging and distribution expenses related to producing and delivering the product or service.

Fixed Costs – Explanation and Examples

Accounting Concepts and Principles / By David J Hoare MSA / 02/19/2014 02/25/2022

‘Fixed costs’ is a business term used mostly in cost accounting. It has several meanings based on its usage. The most common definition associated with fixed costs is expenses that must be paid regardless of production or sales volume. The best example is rent for a company. It doesn’t matter whether you produce or sell one widget or several thousand, the rent must still be paid.

So why is it important to understand fixed costs? How is it used in cost accounting and in financial reporting? Finally, what are examples of fixed costs?