Share Market Knowledge: Know whether a share will rise or sink by looking at just 2 things, there will always be profit.
How do I know which stock is best to buy: Which company shares to buy to make money? This is the question that stands before those who invest money in the stock market. People suffer losses in the stock market only because they fail to choose the right company to invest their money in. But is choosing the right company such a difficult task? It is not very difficult but it will take some effort. By looking at the 2 main figures of the company, you can predict the future of the company. If you invest money only after knowing the horoscope of the company, you will get profit.
The two figures we are talking about are assets and liabilities. Even if you don’t understand the business and its intricacies, you can see the future of the company through these two things. By doing this you will avoid the least possible damage. Well let us tell you that stock market experts invest money only after understanding the fundamentals of companies. To know whether the fundamentals are good or bad, one has to examine the companies’ balance sheets. Apart from this, their future strategies will also have to be monitored. Only then does an expert express his opinion on the stock.
What is a balance sheet?
A balance sheet is an important document, which provides information about the financial position of a company to its investors and stakeholders. It mentions the total assets as well as liabilities of the company. By looking at them carefully we can know what is the financial condition of the company. The balance sheet formula is something like –
Assets = Liabilities + Shareholder’s Equity
The balance sheet contains information about assets on one side and liabilities on the other. It talks about the total assets of the company and shows where these assets are being financed. This financing is done either through debt or through equity. It is also called the statement of net worth or statement of financial position.
How to Check Balance Sheet Before Investing
It may seem like reading a balance sheet would be a huge task, but it is quite simple. All you have to do is compare assets and liabilities. If the assets are good and the liabilities are low, the shares of the company may be useful for you. If the result is opposite then it is better to stay away from this company.
What are assets?
There are two types of assets –
1. Current Assets – Assets that are expected to be converted into cash within one year. It includes cash, accounts receivable, inventory and short-term investments.
2. Non-current assets – such assets are not converted into cash in a single year but provide benefits in future years. They are also called long-term assets. This category of assets includes property, plant, equipment etc. Such assets show that the company is looking to grow in the long term and has good money-making potential in the future.
What are the liabilities?
Obligations are also of two types-
1. Current Liabilities – Debts that the company has to repay within a year. This includes things like accounts payable, short-term loans, and small portions of long-term loans. The higher these liabilities are compared to assets, the more they will prevent the company from growing. However, long-term growth can be better if the company manages it well.
2. Non-Current Liabilities – Liabilities that will remain outstanding even after one year. It includes long term loans, bonds payable, tax liabilities etc. If the company has to pay a lot of debt in the long run, the financial risk in the company will be high.
Where to view the balance sheet
Now one last question may arise in your mind that if you want to check the balance sheet of any company, where can you find it? The balance sheets of companies listed in the stock market must be available on their websites. Also you can check on MoneyControl, the country’s largest business website. Here you will find complete information. We hope you understand this concept and will definitely consider it before investing money in the future.
Also Read – Share Market Knowledge: If you see this in falling shares, it means the bulls have entered.
(Disclaimer: This article is written for informational purposes only. If you want to invest in any share, consult a certified investment advisor first. News18 will not be responsible for your profit or loss. )
First Publication: February 8, 2024, 12:48 IST
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