Comments on: Financial Statements and Baseball Statistics http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/ Personal Finance, Writing, and Blogging Mon, 01 Dec 2008 22:02:40 +0000 http://wordpress.org/?v=2.6.2 By: The Writer’s Coin » Blog Archive » Carnival of Personal Finance #150 http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-978 The Writer’s Coin » Blog Archive » Carnival of Personal Finance #150 Tue, 29 Apr 2008 00:45:12 +0000 http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-978 [...] hosted over at Lazy Man and Money. The article of mine that was included was a piece I wrote on the similarities between financial statements and baseball statistics. Lazy and I will have a discussion on how [...] [...] hosted over at Lazy Man and Money. The article of mine that was included was a piece I wrote on the similarities between financial statements and baseball statistics. Lazy and I will have a discussion on how [...]

]]> By: Carnival of Personal Finance #150 http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-976 Carnival of Personal Finance #150 Mon, 28 Apr 2008 12:58:55 +0000 http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-976 [...] Writer’s Coin writes about the similarities between financial statements and baseball statistics. I’m going to have to have a little side conversation with him about the value of RBIs as a [...] [...] Writer’s Coin writes about the similarities between financial statements and baseball statistics. I’m going to have to have a little side conversation with him about the value of RBIs as a [...]

]]> By: WealthBoy http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-880 WealthBoy Mon, 14 Apr 2008 12:28:21 +0000 http://www.thewriterscoin.com/2008/04/14/financial-statements-and-baseball-statistics/#comment-880 There's no doubt that earnings are definitely a major player when analyzing companies. Unfortunately, as you said, it isn't as simple as just looking at earnings. Cash flow is another important statistic that should be looked at in conjunction with earnings. A company may have great earnings but poor collections. If they aren't collecting on the receivables they are generating, they could be in big trouble. A company can also have great cash flow because they are heavily leveraged on capital assets and a lot of the cash flow comes from depreciating those assets. Depending on your investment preferences and the company you are analyzing, high leverage may or may not be a concern. You can see what sort of leverage the company has on capital assets and long-term debt by reviewing the balance sheet. Cash flow can also be improved by issuing stock or increasing debt. Again, the balance sheet will tell the story there as well. Although it isn't a single statistic, I think the balance sheet is the most important financial statement. It is the scorecard and the income statement and cash flow statement are essentially derivatives of the balance sheet. There’s no doubt that earnings are definitely a major player when analyzing companies. Unfortunately, as you said, it isn’t as simple as just looking at earnings. Cash flow is another important statistic that should be looked at in conjunction with earnings. A company may have great earnings but poor collections. If they aren’t collecting on the receivables they are generating, they could be in big trouble.

A company can also have great cash flow because they are heavily leveraged on capital assets and a lot of the cash flow comes from depreciating those assets. Depending on your investment preferences and the company you are analyzing, high leverage may or may not be a concern. You can see what sort of leverage the company has on capital assets and long-term debt by reviewing the balance sheet. Cash flow can also be improved by issuing stock or increasing debt. Again, the balance sheet will tell the story there as well. Although it isn’t a single statistic, I think the balance sheet is the most important financial statement. It is the scorecard and the income statement and cash flow statement are essentially derivatives of the balance sheet.

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