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- Value
- How to really read financial reports
- About investing in Broadway Shows
- Investing in Diamonds
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What a Greenback is worth if part of it is missing
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| HOME | PERSONAL MONEY MANAGEMENT |
| How to really read financial reports: The growing complexity of corporate finance and recent changes in accounting standards can make it difficult for even the most sophisticated investor to judge a company's health accurately from its financial reports.
However, we have come up with simple ways to translate the increasingly garbled language of financial reports. What we watch:
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- Annual reports. Compare the latest report with the two previous ones. Though the chairman's letter usually portrays the company in a positive way, the best way to measure management integrity is to watch what was pro,ised in years past and see how those promises turned out.
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| If the chairman's letter is so optimistic that he/she would be better suited to work as a Florida sunny-weather forecaster, beware. Coleco was like this. Management projected nonstop optimism all the way to bankruptcy. Now the company is in Chapter 11. |
| Tipoff:: Any glossing-over of obvious negatives. |
- Income statements. Helpful: Pay close attention to income statements in the company's financial reports. Aim: to see how clear the earnings statement is of nonoperating items such as deferred income tax credits, sale of assets, and interest income such earnings are real, but they're not the same as operating earnings. They may not occur again.
- Balance sheets. A key element: debt. How much debt is short-term (due within a year) and how much is long-term. Too much short term debt can squeeze the company's operating flexibility by hurting cash flow.
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| For most industrial companies, a balance of 40% debt and 60% shareholders equity is about right. Above 40% of total capital debt can become worrisome. |
- Footnotes to financial statements. These tie in with and further explain the income statement and the balance sheet. Sometimes there are as many as 30 footnotes. And they can be very complex. Always read them, however, because they often contain information you can't get anywhere else. Example: Details about lawsuits against the company that could represent big future liabilities.
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| About investing in Broadway Shows |
| Broadway investors seldom earn their money back, let alone make a profit---even with shows that are hits. Investors are the last people to be paid. Royalties go to stars, producers, directors, authors, composers, lyricists, and choreographers. These royalties, percentage of the box-office gross receipts, are paid whether the show is making money or not. Of course, operating costs are met. Then if anything is left over; investors get theirs.
Why invest: A few shows reward investors handsomely. After they pay back the original investment, the investors split further profits from the box office with the producers.
Then there are tax advantages worth LQQking into!
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| Investing in Diamonds |
| Unless you're in the business, diamonds are a bad investment. Why: Most of us buy at retail (at a markup of 100%) and have to sell at wholesale. What your diamond is worth: about 20% of the appraised value. Also: Diamonds are not really rare. De Beers has artificially maintained the rarity of diamonds by withholding them from the market, but its monopoly is currently breaking down. Possible result: a total collapse of world diamond prices. Good investment stones: rubies, emeralds, sapphires, and colored diamonds. These are naturally rare. |
| What a Greenback is worth if part of it is missing |
| Worn and torn paper money will be replaced by the Department of the Treasury if threefifths or more of the bill remains intact. If less than three-fifths but more than two-fifths exists, the bill is worth one-half its face value. For redemption of a smaller fragment, proof must be offered that the missing portion is destroyed. Such bills will be replaced at face value by your local bank. Value remains the same. |
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