Sunday, February 22, 2009

Warren Buffett and the Interpretations of Financial Statements

You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect Language, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stock yourself
--Warren Buffett

This book is about how to search for the company with a durable competitive advantage. It was written by Mary Buffett and David Clark. This book explains every item in financial statements from Warren Buffett's perspective.

I find this book suitable for beginner who is interested to learn how to read financial statements yet has no clue where to start. The book is divided into three major sections: The Income Statement, Balance Sheet and The Cash Flow Statement. Each chapter in the section is dedicated to one item of the statement. The authors uses companies like Coca-Cola, Pepsi, Wrigley, Procter & Gamble, etc for an example to illustrate the differences between the companies that have durable competitive advantage and those without it. (But I wish the authors could have reduced the usage of the word ‘durable competitive advantage’ in this book. I do get it that ‘durable competitive advantage is important in every chapter that I read.)

You can get it from book store around the island for $40 but I recommend you borrow from national library ( before you decide whether is it worth investing your money.

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