UI Extensions: Analysing Reports

[dayton-outar]

• [ ] Differentiate and highlight top 5 in bubble chart by new category (and color)
  • [ ] Add Warren Buffet checklist for company with durable competitive advantage
• [ ] Classify Financial Shenanigans in Announcements for each company
  • Financial Report Notes (as well)?
• [ ] Bring meaning to ratios (or multipliers)
• [ ] Visualization for stock index needed. Preferably line chart.
• [ ] Injecting the stock index performance against the line chart for each stock. Beta visualization

[dayton-outar]

Types of Financial Reporting Shenanigans.

Earnings Manipulation

1. Recording revenue too soon
2. Recording bogus revenue
3. Boosting income using one-time or unsustainable activities
4. Shifting current expenses to a later period
5. Employing techniques to hide expenses or losses
6. Shifting current income to a later period
7. Shifting future expenses to the current period

Cash Flow Shenanigans

1. Shifting Financing cash inflows to the Operating section
2. Moving cash outflows from the Operating section to other sections
3. Boosting operating cash flow using unsustainable activities

Key Metrics Shenanigans

1. Showcasing misleading metrics that overstate performance
2. Distorting Balance Sheet metrics to avoid showing deterioration

Acquisition Accounting Shenanigans

1. Artificially boosting revenue and earnings
2. Inflating reported cash flow
3. Manipulating key metrics

[dayton-outar]

Warren Buffet's Interpretation of Financial Statements

Income Statements

1. Gross Profit Margin

   margins [consisitently] below 20% is a good indicator of a fiercely competitive market

2. Depreciation against Gross Profits (dividing Depreciation by Gross Profit)

   companies with a percentage depreciation lower than 8% tend to have a durable competitive advantage

3. Earnings per Stock Unit

   a consistent upward trend is a good sign

Balance Sheet

1. Quick Ratio

   companies with surplus of cash have a durable competitive advantage

2. Inventory Turnover

   manufacturing companies with inventories that ramp up stock in one year and ramp down the next year is showing signs of being in a highly competitive market

3. Receivables Turnover

   companies consistently showing lower ratio of recievables compared to their competitors has a higher competitive advantage

4. Return on Assets

   high ROA may indicate vulnerability of the company and, hence, vulnerability of durable competitive advantage

5. Total Assets

   high total asset can present high barrier to entry [for other prospective competitors to enter]

6. Long-term vs Short-term Debt

   Buffet shied away from companies that are bigger borrowers of short-term money [rather] than long-term money. He preferred Wells-Fargo $0.57 of short-term debt to every dollar or long-term debt than to Bank of America $2.09 of short-term debt to every dollar of long-term debt.

7. Debt-to-Equity

   companies with durable competitive advantage often carry little or no long-term debt sometimes this can be skewed to make a great company look mediocre due to stock buybacks

8. Return on Equity

   high ROE will add up and increase the underlying value of the company

Cash Flow

1. Treasury Stock Units

   presence of treasury shares is a hallmark of a company with durable competitive advantage

2. Preferred Stock Units

   companies with durable competitive advantage tend not have preferred shares