With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple guide for reading financial statements from Buffett's successful perspective.

Knowledge sharing initiative Book 3: "Zurich Axioms" by Max Gunther

The book crystallizes how to think about taking investment bets (position sizing), and how to reduce risks in investing & speculation. It focuses on teaching a balance between rewards & risks.

(1/n)

Here are the key takeaways from the book:

1. Take sizeable bets in life: Taking small bets will give you a good night's sleep as you have very little to lose, but the important point is "it won't ever make you rich".

(2/n)

2. Taking size-able risk is necessary to get rich but make sure you don't go bankrupt taking that risk.

3. Don't diversify too much as gains & losses will nullify each other.

(3/n)

4. Be less greedy to make money - Book some profits when you see a sudden huge increase in wealth - fear of regret will stop you from booking profits but don't be greedy as consistent streaks of lucks are rare in life.

(4/n)

5. Cut losses when you go wrong don't start praying that your losses will recover rather act quickly take some loss and sell out.

(5/n)

Knowledge sharing initiative Book 4: "The interpretation of financial statements" by Benjamin Graham.

This book was published around 1937 by investing legend Ben Graham. Ben is also regarded as the guy under whom the great Warren Buffett started his investing journey.

This book teaches financial statement analysis in a very simple manner. It also focuses on the key relationship between P&L, B/s & Cash flow statements of a company.

Here are key takeaways from the book 👇👇

1.B/s shows how much a company owns (assets) & owes (liabilities) at a particular point in time mostly prepared on a semi-annual & annual basis.

2.Assets=Tangible (PP&E, inventories, accounts receivable, cash)+intangible Assets (trademark, lease rights, goodwill)

3.Liabilities=Short term debt (accounts payable,current portion of long term debt,advances from customers) + Long term Debt (bank loans,bonds,lease liability)
4.Tangible assets are written down through depreciation & intangibles are written down through amortization or impairment

5. Depreciation & amortization means normal wearing out assets over its typical lifespan. It allows the cost of the asset to be charged off (in the income statement) over a number of years.

6. Depletion gets applied in commodity businesses like cement, mining, and crude oil.

If you're trying to analyze a company without using an adequate checklist, you may make a very bad investment" - Charlie Munger

Small Thread of Investment Checklist from Masters

1. Charlie Munger's Investment Checklist

2. Warren Buffett's Investment Checklist

3. Philip Fisher's 15 points Businesses Analysis Checklist

4. Peter Lynch's Investment Checklist

5. Mohnish Pabrai's Investment Checklist

@contrarianEPS I don't know about crypto but I invested because it's was rising

- Retail Investor

While Financially Analyzing Businesses (esp Small Leaders), this is THE Order:

- Cash Flow Statement (Focus on Operating Cash)
- Cash Position

- Balance Sheet Strength
- Never Miss Receivables

- P&L

Cash >> Balance Sheet >> Finally P&L

#FI

Whilst accountants know how to prepare a BALANCE SHEET… 95% don’t know how to read them.

Interpreting balance sheets is the HARD bit.

So, here are the first 3 things I look for when reading a balance sheet.

Pull up a chair.

Let's go! 👇

When I review a balance sheet, I need a detailed picture of how the business is funded.

I’ll build out a picture under 3 headings;

1. Capital Structure
2. Working Capital Profile
3. Liquidity Headroom

Let's tackle them each in turn

1. Capital Structure.

The capital structure tells you how a business is funded / owned.

Is the business funded by debt or equity? What is the mix?

Who are the investors and what are their motives? And what are the rights and obligations attached to each?

Take each debt or equity instrument in the balance sheet and get clear on the following:

Who owns it?
How much have they put in?
What are they owed today?
What does their return look like if things go well
What are their rights if things don’t go well?
When does it mature?

I visualize this in a table.

I put the most senior ranking debt at the bottom.

Yes, this is upside down to the way you may have seen this presented before.

What can I say, I'm a rebel 😎

Everything about Free cash Flow Simplified!

What we will talk about in this 🧵🧵:

1⃣What is Free Cash Flow
2⃣How to calculate Free Cash Flow
3⃣Types of Free Cash Flow
4⃣Importance & Limitations of Free Cash Flow

Let's dive in ⤵️⤵️

What is Free Cash Flow?

Free cash flow means the cash that is left over after a company pays for its operating expenses and capital expenditures (Capex) like purchasing new machinery, equipment, land & building, etc. and satisfying all its working capital needs.

In simple words, suppose whatever cash that is left with you after you spend your salary or income is known as Free cash flow that you can use for different purposes.

The more FCF a company has, the better it is. Businesses which generate high FCF can:-

1⃣Give investors higher dividends
2⃣Do share buybacks
3⃣Build a war chest for acquisitions or Capex.
4⃣Reinvest in the business when opportunity arises with lesser dependence on debt.

How to calculate Free Cash Flow👇:

To calculate free cash flow, all you need to do is open the Cash Flow Statement and subtract "Net Capital expenditure" from "net cash from operating activities".

@unseenvalue #Screened few businesses trading at single digit MCap/CFO.

I made a mistake in above list.
Apologies ! It is accidental discovery of businesses trading at single digit MCap / Cash End of Last Year.

🌟Here is businesses #screened for MCap/CFO.

Excellent resource for Individual investors who want to learn about Accounting and Financial Statements.📊

The concepts are really well explained in a simple, understandable manner for beginners.

cc: @dmuthuk @Gautam__Baid

Content available 👇

Some of my fav sections.

1⃣ The Financial

2⃣ Fundamental Accounting

3⃣ Financial Ratio