“Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.” Warren Buffett
Accounting is the language of business and for many investors plowing through financial statements is the equivalent of getting a root canal.
Continue Reading Below
If you’ve spent hours trying to figure out why the accounting software won’t take your debit or credit entry, you have plenty of company (yours truly included).
There are two broad categories of accounting, basically managerial and financial.
Financial accounting deals with financial statements and the different aspects of a company’s operations.
Yet, as Warren Buffett says, “it’s important to remember the business is reflected by the numbers, and not vice versa.”
Accounting is like the plumbing in a house or the foundation of a building, the nuts and bolts of understanding what is going on in a business.
The reason why I bring this up is that business analysis is often forgotten or replaced by charting or computer algorithms. In my opinion, you are far better off sharpening up your accounting skills and thinking about competitive positioning instead.
The post In praise of analysis appeared first on Smarter InvestingCovestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures.