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Income Statement Analysis
- Great companies and good
EPS growth
do not guarantee
stock market profits
- The P/E ratio can create
buying opportunities
- Mishaps can create steals
- Unusual charges reduce the
value of your stock
- ROE is the single best tool
for investors
- ROA is another valuable tool
- Investors pay for high profit
margins
- Lenders can eat up all the
profits
- Depreciation creates
deferred taxes, which have
equity-like qualities
- EPS is a complicated
calculation
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Income Statement Analysis
Because the Income
Statement reports the profitability of a company, which is the main element
of valuing a stock, it is therefore the single most important financial
document produced by a company. This section deals with how to analyze a
business by using the Income Statement to determine at what price (if any) a
company is a worthwhile investment.
10 Investment
Concepts
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