Author Topic: Understanding Financial Statements  (Read 895 times)

carstenjames

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Understanding Financial Statements
« on: October 17, 2017, 04:52:57 PM »
Hi,

All I know that most people here are index investors but I am interested in how a companies fundamentals influence it's stock price.  I've been browsing through financial statements and have been frustrated by the lack of agreement between different data providers ... i.e. differences to the tune of billions of dollars.

Take for example IBM's 2016 financials, morningstar, yahoo finance, google finance, and edgar all report different numbers for Sales, General and Administrative Operating Expenses:

Morningstar: 20,479,000,000 (http://financials.morningstar.com/income-statement/is.html?t=IBM&region=USA&culture=en_US)
Yahoo Finance: 19,438,000,000 (https://finance.yahoo.com/quote/IBM/financials?p=IBM)
Google Finance: 19,640,000,000 (https://finance.google.com/finance?q=NYSE%3AIBM&fstype=ii)
SEC Edgar: 21,069,000,000 (https://www.sec.gov/Archives/edgar/data/51143/000110465917003081/a17-2670_1ex99d1.htm)

Yahoo and Google are the closest but that's still a 200 million dollar difference.

I believe that the 8-k filing referenced from EDGAR is probably the most authoritative source and morningstar, yahoo and google are sourcing their info from that in some fashion.  So my main question is they are clearly pulling values in a different way than I am interpreting them.  Maybe the differences is that the SEC Edgar numbers are not GAAP?

Thanks for any help!

sokoloff

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Re: Understanding Financial Statements
« Reply #1 on: October 17, 2017, 05:30:16 PM »
Look on page 43 here for a start:
https://www.ibm.com/annualreport/2016/images/downloads/IBM-Annual-Report-2016.pdf

Those have some items who may have different treatments depending on what view of the company you're interested in. The Edgar numbers are almost assuredly GAAP numbers.

The numbers that might warrant different treatment for example are "Workforce rebalancing charges". If you're interested in the long-run profitability of a steady-state IBM, you don't care that they spent over $1BB on restructuring charges.
Likewise "Amortization of acquisition related intangibles" is not the same as "commissions and salaries paid to sales people" when considering the long-view of the company.

DavidAnnArbor

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Re: Understanding Financial Statements
« Reply #2 on: October 17, 2017, 07:16:56 PM »
You will want to analyze the Income Statement, Balance Sheet, and the Cash Flow statements for these publicly trade corporations.

These are found in the 10-Q (quarterly), and 10-K (annual statements)

https://www.sec.gov/edgar/searchedgar/companysearch.html   - to get to the company quickly, use the stock ticker symbol.

For IBM:

https://www.sec.gov/cgi-bin/browse-edgar?CIK=ibm&owner=exclude&action=getcompany&Find=Search