How to analyze financial statements?

Yeolmae · August 7, 2019, 9:04am

I have to analyze financial statements for a company, say Oracle, for the last 5 years including revenue, net profit, employee count and other significant details released in quarterly results? How do I do it?

SamCryBaby · August 7, 2019, 11:30am

PM greenman,he does it for a modest fee.

Yeolmae · August 7, 2019, 11:56am

No, I want to do it myself. If you or anyone can tell me how do I go about it?

hpracing007 · August 7, 2019, 1:51pm

+1

SamCryBaby · August 7, 2019, 1:51pm

Again, I would PM him and set up a video call.

Yeolmae · August 7, 2019, 2:44pm

Okay I’ll message him.

StreetFighter · August 7, 2019, 2:45pm

That’s his bread and butter. Don’t be so mean!

Tank.

profitfromfolly · August 7, 2019, 4:23pm

@Yeolmae, I do this on a daily basis.

It depends on the industry, type of company, and your perspective. But generally, I look at three buckets: 1) Profit. 2) Liquidity (Cashflow) 3) Leverage. From a risk perspective, you are looking at whether the company is a going concern. From an investing perspective, you want to determine if the company is valued at the right price - this is much more intensive, requires different metrics than below and requires modeling.

From a risk perspective, generally:

Profit: revenue growth, profit margin, operating income.
Liquidity: current ratio, cash flow from operations
Leverage: Long-term debt/equity, interest-bearing debt/equity, interest coverage ratio. Note : an operating company should have lower D/E than an investing company. A manufacturing firm would perhaps have 50% assets funded by debt (D/E = 1), while a bank would normally have 80-90% debt to assets (D/E through the roof). Research the industry benchmarks.

SaaS companies and start ups use different metrics and fundamental analysis don’t really work. Check out things like Rule of 40, Efficiency ratio.

Hope this gives you a bit of a start. Remember - Cash is King.

GorillaNerd · August 7, 2019, 5:56pm

https://www.sec.gov/Archives/edgar/data/1341439/000156459019023119/orcl-10k_20190531.htm

those are eery year you need. just click the links. ur welcome.

Yeolmae · August 7, 2019, 6:04pm

profitfromfolly:

@Yeolmae, I do this on a daily basis.

It depends on the industry, type of company, and your perspective. But generally, I look at three buckets: 1) Profit. 2) Liquidity (Cashflow) 3) Leverage. From a risk perspective, you are looking at whether the company is a going concern. From an investing perspective, you want to determine if the company is valued at the right price - this is much more intensive, requires different metrics than below and requires modeling.

From a risk perspective, generally:

Profit: revenue growth, profit margin, operating income.

Liquidity: current ratio, cash flow from operations

Leverage: Long-term debt/equity, interest-bearing debt/equity, interest coverage ratio. Note : an operating company should have lower D/E than an investing company. A manufacturing firm would perhaps have 50% assets funded by debt (D/E = 1), while a bank would normally have 80-90% debt to assets (D/E through the roof). Research the industry benchmarks.

SaaS companies and start ups use different metrics and fundamental analysis don’t really work. Check out things like Rule of 40, Efficiency ratio.

Hope this gives you a bit of a start. Remember - Cash is King.

Thank you so much. Also, how do I incorporate employee count in this?

Yeolmae · August 7, 2019, 6:05pm

Thank you

profitfromfolly · August 7, 2019, 7:52pm

Um, are you trying to figure out operating cost per employee? revenue per employee?

I don’t think I’ve ever considered employee count in any form of financial statement analysis. What is the question you are trying to answer?

Mobius_Strip · August 8, 2019, 2:52am

Yeolmae:

profitfromfolly:

@Yeolmae, I do this on a daily basis.

It depends on the industry, type of company, and your perspective. But generally, I look at three buckets: 1) Profit. 2) Liquidity (Cashflow) 3) Leverage. From a risk perspective, you are looking at whether the company is a going concern. From an investing perspective, you want to determine if the company is valued at the right price - this is much more intensive, requires different metrics than below and requires modeling.

From a risk perspective, generally:

Profit: revenue growth, profit margin, operating income.

Liquidity: current ratio, cash flow from operations

Leverage: Long-term debt/equity, interest-bearing debt/equity, interest coverage ratio. Note : an operating company should have lower D/E than an investing company. A manufacturing firm would perhaps have 50% assets funded by debt (D/E = 1), while a bank would normally have 80-90% debt to assets (D/E through the roof). Research the industry benchmarks.

SaaS companies and start ups use different metrics and fundamental analysis don’t really work. Check out things like Rule of 40, Efficiency ratio.

Hope this gives you a bit of a start. Remember - Cash is King.

Thank you so much. Also, how do I incorporate employee count in this?

(FTE x % / 3$) if operating LLC (mod pi).

Yeolmae · August 8, 2019, 9:29am

I copy pasted what was written where I saw it. That’s what confusing me too.

Yeolmae · August 8, 2019, 9:30am

Mobius_Strip:

Yeolmae:

profitfromfolly:

@Yeolmae, I do this on a daily basis.

It depends on the industry, type of company, and your perspective. But generally, I look at three buckets: 1) Profit. 2) Liquidity (Cashflow) 3) Leverage. From a risk perspective, you are looking at whether the company is a going concern. From an investing perspective, you want to determine if the company is valued at the right price - this is much more intensive, requires different metrics than below and requires modeling.

From a risk perspective, generally:

Profit: revenue growth, profit margin, operating income.

Liquidity: current ratio, cash flow from operations

Leverage: Long-term debt/equity, interest-bearing debt/equity, interest coverage ratio. Note : an operating company should have lower D/E than an investing company. A manufacturing firm would perhaps have 50% assets funded by debt (D/E = 1), while a bank would normally have 80-90% debt to assets (D/E through the roof). Research the industry benchmarks.

SaaS companies and start ups use different metrics and fundamental analysis don’t really work. Check out things like Rule of 40, Efficiency ratio.

Hope this gives you a bit of a start. Remember - Cash is King.

Thank you so much. Also, how do I incorporate employee count in this?

(FTE x % / 3$) if operating LLC (mod pi).

Oh dear Lord

Yeolmae · August 8, 2019, 1:04pm

I tried to attempt like this. Please give me your suggestions.

https://drive.google.com/file/d/1soRq0oBp4IzFZK9rp8eA9ZHe98tE-s8B/view?usp=sharing