Investing For Canadians All-in-One For Dummies

Chapter 5

Using Accounting Basics to Choose Winning Stocks

IN THIS CHAPTER

Determining a company’s value

Using general accounting principles to understand a company’s financial condition

Too often, the only number investors look at when they look at a stock is the stock price quote. Yet what really drives the stock price is the company behind that single number. To make a truly good choice in the world of stocks, you have to consider the company’s essential financial information. What does it take to see these important numbers?

This book and a little work on your part are all you need to succeed. This chapter takes the mystery out of the numbers behind the stock. The most tried-and-true method for picking a good stock starts with picking a good company. Picking a company means looking at its products, services, industry, and financial strength. Considering the problems that the market has witnessed in recent years — such as corporate debt problems and derivative meltdowns wreaking havoc on public companies and financial firms around the world — this chapter is more important than ever. Don’t underestimate it. Because accounting is the language of business, understanding the basics behind the numbers can save your portfolio.

Recognizing Value When You See It

If you pick a ...