Brian Feroldi on LinkedIn: How to analyze a balance sheet in <2 minutes: Answer these 12 questions:… | 44 comments (2024)

Some key balance sheet questions to ask of your firm, from Brian Feroldi.

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📊 Mastering the art of analyzing a balance sheet is crucial for investors. Brian Feroldi provides a quick, insightful guide to navigating this financial statement in less than 2 minutes. His 12 key questions are a game-changer for understanding a company’s financial health. Don’t miss out on his upcoming webinar for a deeper dive. #FinancialLiteracy #InvestingTips #BalanceSheetAnalysis

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For the fith answer I think it is subjective because depending on the type of the company it might be an excessive amount of cash that they are holding. For that, they have to analyze the liquidity ratios to see whether it will be wiser to invest that money, to prevent the influence of the inflation. In addition it's also about where the board of directors and the overall management team want to take the company.

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Quick and easy.

Here are some interesting balance sheet flags from Brian Feroldi for you to consider:

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How to analyze a balance sheet - FASTWatch for these 10 green flags:1️⃣ More Cash Than DebtFormula: Cash vs DebtWhat: Cash creates options. Debt reduces options. Strong companies don't need much debt.2️⃣ No Accounts ReceivablesFormula: Accounts ReceivablesWhat: Ideally, a company gets paid right away for sales and does not issue credit to its customers.3️⃣ No InventoryFormula: InventoryWhat: Ideally, companies do not hold inventory.4️⃣ Goodwill Less Than 10% of Total AssetsFormula: Goodwill / Total AssetsWhat: Ideally, a company grows organically, not by acquisition.5️⃣ Current Liabilities Less Than CashFormula: Current Liabilities vs CashWhat: Great companies do not have a lot of liabilities. Ideally, they could pay off all of their liabiilies with cash on hand.6️⃣ No Short-Term or Long Term DebtFormula: Short-Term & Long Term DebtWhat: Great companies don't need to use debt to fund themselves7️⃣ Deferred RevenueFormula: Deferred Revenue (Look in Other Liabilities)What: Deferred revenue means a company gets paid before it has to deliver the product / service. That produces cash and is a great sign.8️⃣ No Preferred StockFormula: Preferred StockWhat: Strong companies don't need to issue preferred stock to fund themselves.9️⃣ Retained Earnings Positive & GrowingFormula: Retained EarningsWhat: Strong companies fund themselves through retained earnings. They also grow retained earnings consistently.🔟 Treasury StockFormula: Treasury StockWhat: Treasury stock means a company is buying back stock from shareholders. That's a positive sign.What Green Flags 🇿🇲 did I miss? Let me know below!***P.S. Want to master financial statements analysis? Join me in November for my cohort-based course, Advanced Financial Statement Analysis.Details here:https://lnkd.in/eun5RHr9Interested? Send me a direct message for a coupon code.If you found this post useful, please repost ♻️ to share with your audience.

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Cheat Sheet

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To grasp a company's well-being, it's crucial to comprehend the balance sheet. In these tough times, it's important to focus on the Cash and Debt section.#accounts #accounting #accountant #balancesheet #accountspayable #accountsreceivable

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Detailed explanation on how to analyze a balance sheet ......

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Basics of Accounting System