How to analyse financial statement from the point of Investor?

Please specify the points which are used to analyse the financial statement & the details of the fiancial statement

Well investor there are many kinds.

First let talk about debt lenders. Ie the banks or financial institutions. When they analyse the financial statements they looks at some key ratios.

Firsty the net profit ratio which is profit over sales......also the quick ratio which is how many times curretn assests that can be quickly converted to cash to cover current liabilities or obligations........this includes assest like cash, stock , acount receivables and marketable securities. They also look of interest coverage ratios....which is how many times the profit after all taxes but before interest payments can cover interest expenses. Overall creditors are interested inteh financial viability of the company from the financial statemetns.

Other investors like shareholder have invested money and bought shares. They get thier returns in forms of dividends and appreciation in share price. As such the market value of the firm is very important. They are interested in the earnings per share of the company..which is profit available per share. They are interested also in the present value of the firm which is all future cash flows. THis is a little hard to calculate but can be done form the balance sheets.

Furthermore, shareholders are intersted in the leverage of the firm, the financial leverage, it increases the risk of the firm but also returns for the sahreholders. Finally the are interested in the ratio of returns to equity...... which is for every dollar of equity how much profit is earned.

What i have menetioned are just soem of the more popular ones. There are many , many way of analysing the financials statements. way to many to discuss here. But just bear in mind....as any investoer you should see what are your interests in the company and from there see how the company is fulfilling those interests.

Hope this helps
Cheers

This is not a subject that can be easily explained in a few paragraphs. It requires study of a text on the subject.

The classic work on the subject is "Security Analysis" Graham, Dodd, and Cottle.

Also of interest would be "The Intellegent Investor" Benjamin Graham and "Interpretation of Financial Statements" Benjamin Graham



A thumb nail discussion is given by the link below, but it does not do the subject justice.