What information would be most important in a financial statement when looking to buy new stock?

Question

A company is interested in investing in an organization and would like to have part ownership through the sale of new stock. What information within the organization's financial statement would be important to the company wanting to buy stock?

Answer 1

Income statement, balance sheet and cash flows would be the amongst the most important pieces of information.

Answer 2

Cash flow

p/e

income statement

growth rate

debt

just be carefull , the market are getting worst every week.

Answer 3

If your company is looking to acquire a substantial amount of a company's stock, there may be blockage factor as well as other preexisting measures to prevent takeover so that the more relevant info may be in the Notes sections of the statements.

If you are just buying a small amount of common stock from the open markets, the important information would depend on the target company's financial standing.

For the typical case of a company having a liquid financial structure and a profitable operation the balance sheet is a lagging indicator whereas the stock price is a leading indicator of its operation performance.  Being a leading indicator, there is no cheap nor expensive stock price, only overvalued and undervalued one.  To go long on a stock you need, therefore, to find the one in a healthy industry sector that is being undervalued.

You need to stay within a healthy industry sector because it's hard for a fish to swim against the flow of the water.

To find an undervalued firm you need to read what "concensus" expectation of the near future incomes established by the analysts and compare those witth your own independent valuations.  Many numbers are relevant, but the key series is the net incomes which are on the bottom line of the income statement.  A growing trend of net income is generally a good sign, BUT because the stock price is a leading indicator, what expected and already factored into the stock price may be a faster growth than what newly reported on the bottom line and, hence, an increasingly profitable income news release may cause the stock price to go down.  On the other hand, a negative (loss) bottom line news may cause the stock price to go up because the loss is less than what the market anticipated...