Taking a Qualitative Look at a Prospective Stock’s Figures

by Joe Lan, CFA

One of the first steps taken by investors when researching stocks is to spend time looking at a firm’s financial statements—specifically, the income statement, balance sheet and cash flow statement.

These financial statements provide investors with figures for revenues and earnings; a summary of assets, liabilities and shareholder’s equity; and the uses of cash. Quantitative analyses of these figures are a good starting point, but when it comes to investing, it is important to remember that financial statements and ratios do not always tell the full story.

While most investors take the time to understand the quantitative element of investment research, a qualitative assessment of the figures enables investors to better judge the company as a whole. It provides an understanding of the driving factors behind the numbers and allows for a clearer judgment on a firm’s prospects going forward.

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Joe Lan, CFA is a financial analyst at AAII.


Discussion

Doug from New York posted 10 months ago:

>The SEC filing for the proxy statement is DEFA14A.

I think this is a typo. The proxy statements are DEF14A. If the proxy statement gets AMENDED, then that is a DEFA14A.

(I've looked through proxies avidly, ever since I heard that Walter Schloss used them!)


Bob Houle from Maryland posted 10 months ago:

Superb article and the "Qualitative Analysis Factors" table at the end truly reflects the author taking the extra effort to make sure the reader pulls out all the "jewels of advice" in the article. Well done. Thank you.


Tom Huggler from Michigan posted 10 months ago:

As an investor new to the analysis of individual companies, I found this article to be exceptional. Thank you for writing it in a clear and cogent manner. It will become my blueprint and, by itself, is worth the cost of membership in AAII.


Douglas Sewall from Maine posted 6 months ago:

Excellent article, thank you!


Douglas Sewall from Maine posted 6 months ago:

Excellent article, thank you!


G Muren from Connecticut posted 6 months ago:

Thank you for such a clear and detailed guide and the outline table to check with.


L Toll from Connecticut posted 2 months ago:

Excellent article for all investors to read and use. Please tell me how to find out when conference calls will be held.
thank you


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