When it comes to analyzing an initial public offering (IPO), the financials will be critical. The prospectus will actually have various sections that repeat the financials as well as provide in-depth explanations; one is called the Management’s Discussion and Analysis (MD&A) section. No doubt, to make a good evaluation of the stock, you will need a good foundation in understanding the core elements: the balance sheet, income statement, and statement of cash flows.
In this chapter, we take a look at the balance sheet. To understand it, we’ll use Buffalo Wild Wings Inc. as an example. The company got its start in 1982 near Ohio State University and then 10 years later began an aggressive expansion with a franchise strategy. ...