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on 18 May 2009
This is a quick and easy-to-read book that details some of the arcana of what appears on a company's financial statements. Those with experience in the field of investing probably know everything here, but they might still pick up something useful from the emphasis that is placed on certain numbers/ratios, things that supposedly Mr. Buffett uses to help find his next company to buy.

The advice provided by this emphasis should be very good to someone who is not interested in gambling, but rather is looking for good companies that will provide a better than average return over a long term (10+ years) investment. Following this advice will clearly lead you to some rather staid, unexciting companies (Coca-Cola, Wrigley's), and will definitely steer you away from young, technically oriented companies. This is not necessarily a bad thing, but the usefulness of this approach depends on both what your investing goals are and how much capital you can invest for what period of time. However, being able to interpret just what those numbers mean on a financial statement is a good skill to have, regardless of your investing goals.

Unfortunately, the book is marred by multiple repetitions of certain very basic points, and some statements that are false to fact ("No one gets rich investing in companies that are losing money" - quite a few do quite well selling such a company short or buying put options). And although some advice is given on market timing - just when should you buy a company after you've identified it as a good long-term prospect - I found the advice inadequate, with not enough emphasis or detail on looking at economic conditions as a whole, market sentiment, current interest rates as a competitive investment vehicle vs your 'pick', etc. Also left hanging was how to identify an otherwise good company that has made a 'solvable' error and is not currently doing well - figuring out what a solvable error is is a matter of judgment and often requires expertise not just in the world of finance but in the specific product line that company is involved with.

Recommended for people who are relatively new to investing, especially young people who can seriously benefit from having a long-term view of investing, but it will provide little for more experienced investors.

---Reviewed by Patrick Shepherd (hyperpat)
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on 9 February 2009
Whether or not Warren Buffett does use the techniques laid out in this book only he will know. Nevertheless, this book is very concise and understandable in its walkthrough of company financial statements.

The book is split in to three parts: the income statement, the balance sheet and the cash flow statement. Each of the statements is analysed to determine the characteristics a company with a durable competitive advantage may have.

By far and away the most comprehensive analysis is given to the income statement. Various ratios are analysed for gross operating profit, expenses, interest expenses, R&D, depreciation and net income. Without going into too much detail, the underlying message in studying these ratios is consistency. Buffett apparently looks back over ten years worth of company statements in a bid to find consistent earnings. Iconic Buffett investments such as Coca-Cola, Gillette and American Express are cited regularly as examples of companys with durable competitive advantages who have consistent upward earnings.

The book is not so comprehensive in the balance sheet and cash flow analysis. However, obvious areas for analysis are highlighted and include long and short term debt, receivables, inventories and PPE. The authors do go into quite a bit of detail when it comes to analysing equity and retained earnings. I learnt quite a bit in this section with regards the treatment of preferred and treasury shares. The cash flow statement is briefly analysed in that apparently this is where Buffet determines the ability of a company to consistently generate cash - a sure sign of a durable competitive advantage.

The book concludes on how Buffett values a company through what apparently he terms an equity bond. This is pre-tax income divided by outstanding shares. He is effectively comparing the yield of bonds versus the yield in equity. Examples such as Washington Post and Coke are used to demonstrate how effective this ratio has been for him.

In summary, if someone wants a solid introduction to the analysis of company statements for investment purposes this book is a good start. While the book doesn't provide the secret to successfully beating the market, it does provide a good insight into some of the basic fundamentals that high quality, well managed companies have.
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on 29 March 2010
I strongly recommend this book. Very simply written, it gives an excellent synopsis of what to look for in the financial statements of a quality company. I think this book would be read very well in conjunction with Philip Fisher's classic 'Common Stocks and Uncommon Profits'. Fisher laid out the theory which Buffett (Warren that is - not Mary) went on to master.

If I have a reservation, it would be that the template financial statements given in the back will lead you to companies that have had outstanding performance over the last 10 or 20 years. Almost invariably, they will have seen enormous share price outperformance. The tricky bit is to extrapolate whether that outperformance will continue into the future. This is the point that Fisher addresses in his book and is the ultimate holy grail of investing. How do I pick five companies for my portfolio that will go on to grow tenfold over the next 20 years?

There is simply no definitive answer to that question. It requires hard work, intelligence and some skill. Qualities Warren Buffet has in abundance. Still this book will point you on the right direction to that grail, so on that basis I give it 5 stars.
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on 25 August 2012
I bought this book as an introduction to the intracacies of finance relating to shares. As a total newcomer this book has been invaluable. Mary Buffet is a gifted teacher, she assumes nothing and explains everything very clearly and simply. As a teacher myself I appreciate someone who has great knowlege who can explain complex subjects clearly. Not everyone can do this. If you are a novice like me who needs this kind of book then you will be very happy you bought it.

If you are a more accomplished invester but want to understand how Warren Buffet uses parts of the balance sheet to find the profitable durable advantage companies that are the mainstay of his stock picking then this will be a great buy for you too.

I have bought other books written by the author and look forward to reading them too.
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on 1 March 2016
Used the phrases 'durable competetive advantage' and 'super-rich' far too often. Comparable to any other book on interpreting financials statements out there, could be useful for the complete beginner.
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on 6 June 2016
This is a book for readers interested in buying shares based on the following philosophy:
1. Shares should be evaluated as a part ownership in a business and with the sense that benefits flow from the economic performance of the business;
2. There is no need or intention to sell the shares any time soon ... so its the long term performance of the business which is important.
3. The view of future prospects can only reasonably assessed by looking at the way the business currently functions rather than for example on the basis of any projections, hopes or dreams.
Putting this another way: this is the search for companies with a 'durable competitive advantage'.
Of course, there are other motives for share purchase such as anticipated rises in shares prices or the possibility that the company holds undervalued assets but the above mindset is what the authors are targetting and is the reason it might be reasonable to put the name "Warren Buffett" front and centre on the cover. Working out how the business currently functions requires an understanding of its financial statements and explains the other part of the title.

The level of the book is 'beginner'. The coverage is not very sophisticated, it is very much aimed at somebody taking their first steps with financial statements. Each of the three main financial statements: income, balance sheet and cash flow is dealt with in its own group of chapters with each chapter addressing one or perhaps a small number of entries on one of the financial statements. The basic meaning of these numbers is given and some kind of suggestion as to how 'Warren' might make use of the numbers. No attempt is made to talk about what might appear in the 'notes to the financial statements', nor is there is much in the way of general discussion of matters of financial accounting. This all makes for an extremely gentle progression. Like I said this is about first steps.

There are a couple of other things the would-be reader should be aware of. Firstly, the financial statements being discussed are American. UK financial statements are slightly though not hugely different. Secondly, there is the connection between Warren Buffett and this book. 'Warren' is referred to on just about every page as being interested in such and such a number for reason of determining whether a company has a 'durable competitive advantage'. It is not clear whether 'Warren' approves or disapproves of the use of his name in regard to the book. He does not for example offer a foreword, nor even a quote for the back cover. He is mentioned in the acknowledgements but in a general way rather than for having contributed specifically to the creation of the book. You would not even need to know Buffett to acknowledge him in this way although the first author presumably does know him as she was his daughter-in-law. I am not sure what to make of this.

Provided the reader sees this book a starting point rather than as an excuse for over-confidence it can not help but ease them along the path to being better informed when investing in shares. In a world in which 'investments' are often chosen on the basis of soundbites from 'celebrity' commentators, establishing a connection to real world, business considerations is definitely a step in the right direction. On the other hand, the content is really basic and is one really getting a genuine slice of brand Buffett? Two stars.
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on 13 September 2011
if you are like me and don't have your accountancy exams then this book is a great place to start if you want to understand financial statements and see if the company you are looking at is another enron. it wont make you warren buffet, but it's a quick read and a good primer...
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on 15 November 2009
As a professional investor, I found most of the information very basic; however, I thoroughly enjoyed this book. People tend to complicate things in life as well as in investing. Warren Buffett preaches investing in companies that possess moats and buying them when the price is reasonable. All this book is trying to do is to help investors assess a company's moat. No, this book alone will not assure investment success, but it adds another tool to the tool box that can help beginning or advanced investors successfully invest in the stock market.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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on 25 November 2011
Financial statements hold clues about the future performance of a company, and Warren Buffett's quest to find such clues has put him among the ranks of the wealthiest people in the world, according to Buffett experts Mary Buffett (his former daughter-in-law) and David Clark. Seeing the interpretation of financial statements through Warren Buffett's eyes is both instructive and insightful. He routinely calculates meaningful financial ratios from line items in financial statements to distinguish the most promising companies from the rest. Although financial novices may have the most to learn from this book, the authors include savvy bits of "Buffettology" for more seasoned investors' benefit. getAbstract recommends this book to readers who want a basic introduction to financial statement analysis and, perhaps more importantly, who want to learn how "the Oracle of Omaha" picks his winning investments.
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on 28 May 2013
For those readers, such as myself, who wanted a relatively easy to follow and comprehend guide to the basics of Financial Statements I would recommend this book. The book is well structured and I found clearly written. In order to extract the best out of the book's content and lessons/advice I read it from start to finish in one sitting and then went through it all again with the financial statements of three live companies in front of me to really get to grips with the information, this worked for me, it may not work for anyone else.
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