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【Crack the Code of Financial Statements】Now is the time for individual investors to have the power to detect fraudulent accounting

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From "Crack the Code of Financial Statements! The Rules of Investment to See Through Bad Stocks" (Kazuyo Katsuma/Random House Kodansha)

In a nutshell

  1. The stock market is highly volatile. Individual investment is booming due to government benefits and telework. But can you read financial statements?
  2. A company's profits can be created. Financial statements are the very code created by a company.
  3. You can probably finish your repeated introduction to accounting analysis with "Crack the Code of Financial Statements!"


Booming individual investment


Since March 2020, the new coronavirus has been raging in Japan as well.


Office workers who were forced to work from home began to use their spare time for investment.


According to the author's personal analysis, the current domestic market is supported by individual investors and the Bank of Japan, and some popular stocks are soaring.


By the way, on what basis does everyone invest?


There are various types of people: those who look at charts, those who watch Gacchiri Monday, those who watch Twitter, those who conduct corporate analysis, those who identify the trends of institutional investors and follow them like remoras, and those who make decisions based on their experience as consumers.


Based on the author's personal experience, I believe that there is nothing better than reading financial statements and purchasing excellent stocks at a bargain price. It's too late to act after seeing the news. 【ZOZO】Decoding the stock price movement of the Yahoo-ZOZO acquisition with the former premium economics book "The Market is Alive"


Stock investment is inherently difficult, so I would like investment beginners to start by learning to read accounting correctly.


I can hear voices saying, "I already know that." I have experience with this as well, but people tend to repeatedly get into accounting, and then in the end, they kind of understand it, but they end up with a feeling of "hmm."


The book that will put an end to the introductory loop of accounting is "Crack the Code of Financial Statements! The Rules of Investment to See Through Bad Stocks" (Kazuyo Katsuma/Random House Kodansha). Don't be fooled into thinking it's just another business book, or that it's just another book by Katsuma. It's full of famous quotes, and although it's old, published in 2007, it's a hidden masterpiece that can still be used in 2020.



A company's profits can be created


First, this book illustrates the impact of general business activities on the balance sheet, income statement, and cash flow statement. First, as a basis of accounting, I want to put this in my head.


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From "Crack the Code of Financial Statements! The Rules of Investment to See Through Bad Stocks" (Kazuyo Katsuma/Random House Kodansha)


After understanding business activities through the three financial statements, this book explains the trends of fraudulent accounting and how to read fraudulent accounting from financial statements with examples.


Next, let's pick up some famous quotes from this book from my Twitter (please follow me if you like).



Of the balance sheet, I would like to focus on fixed assets and deferred assets in the assets section. Except for land, machinery, real estate, software, etc. must all be expensed through depreciation. There are many companies with inflated assets, but you need to be prepared for future profits to be compressed. A clean office will eat into your profits.



This was a trend seen in Livedoor in 2005, in startups that received huge investments until 2019, and in RIZAP in 2019. This is a type of company where apparent sales and total assets swell due to repeated investments and M&A, but operating cash flow does not grow. As mentioned above, fixed assets are future expenses, so if you are not careful, the financial statements will surely collapse. When financial statements collapse, it is easy to be tempted to commit fraudulent accounting, so be careful (there were companies like that and that, weren't there?).



Introduction to Accounting, Complete


There are many business books on accounting, but books that focus on the perspective of investment and support stock analysis from financial statements in an easy-to-understand manner are valuable.


In particular, individual investment is easily swayed by the news. Fintech, AI, shared offices, and cashless payments were particularly hot until 2019. 【Yahoo and LINE】The No-Side Phenomenon Seen in the LINE/Yahoo Business Integration. A Game Changer in the Smartphone Payment Market


Also, investment beginners are missing the basic principles of investment. Investment is about anticipating what everyone is thinking and getting in ahead of them. It's too late to act after you know the news. Also, suspicious information about the target stock, such as trends in fraudulent accounting, is not readily available, so at the level of individual investment, it is important to first make a judgment from the financial statements.


Unfortunately, there is no e-book version such as Kindle, and since it was published in 2007, it is currently only available as a used book. If you're going to buy it, now is the time.


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From "Crack the Code of Financial Statements! The Rules of Investment to See Through Bad Stocks" (Kazuyo Katsuma/Random House Kodansha)



Aside



The author's workout app, BADDY, is now available. Let's try your first workout while watching how to do difficult workouts and how to use gym equipment on the app. Download an exercise menu and use it as a workout companion. I recently added a home workout menu.


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For details, see below. https://baddyworkout.com/blog/2017-01-04-start/