Trading companies financial statements
Financial statements are a useful tool for judging the health of a penny stock company,and for comparing it to its competitors.
They show what the company owes and owns,the profits or losses it has made over a given period,and how their position has changed since their last statement.
Generally if you can tell which direction penny stocks are heading,you can also forecast future stock prices with some accuracy.
Gaining a basic knowledge of financial statements,and applying this knowledge when choosing or assessing investments can help you pick tomorrow's winning penny stocks,while avoiding tomorrow's losers.
Of course,financial statement analysis will not forecast future events and unexpected situations which may influence the share prices of the penny stocks,but it provides a starting point from which to gauge the present value of shares.
Although the topic can get much deeper and more complex,this section is designed to give you the ability to understand the numbers and implications of the statements. This knowledge should assist you to make better decisions when doing your due diligence.
The balance sheet shows a penny stock's financial position at a specific date.
One part of the balance sheet shows what the company owns and has owing to it,called assets.
The other part represents liabilities,which are what the company owes. The liabilities also includes shareholders' equity,which represents the excess of the company's assets over its liabilities. Shareholder's equity is often referred to as book value. Many penny stocks have negative (or nil) book values.
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