Analysis of Asset Allocation

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Fundamental Analysis: an introduction to the balance sheet
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DEFINITION

The balance sheet shows the financial position of a company at a certain date. The balance sheet represents a photo of the company at a certain moment in time. The listed companies issue balance sheet several times during the year (quarterly). The one representing the fourth fiscal quarter is the annual report.

Depending on the general environment, analysts focus more on earnings or on assets quality. In a growth environment, expected earnings are leading but when difficulties happen, assets quality is the star.

But even in a growth environment it would be a serious mistake to discard the balance sheet as an anachronism. When you purchase stocks, you are buying a share in the ownership of the company. Even if earnings are very important, never forget that the company will use his assets to generate the earnings. The balance sheet tells you story you should at least listen to.

The balance sheet is a very static picture of the company and therefore has some limitations.

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