Before you sink a bunch of money into an attractive stock, make sure you understand what the company’s true profits really are by stripping away the one-time, exceptional items that can make the earnings look more robust than they really are.
Every investor faces a whole host of challenges in managing their portfolio. Chief among them: deciding not only when to buy, but also when to sell. This is critical when you’re taking profits and when you’re cutting losses.
Financial statements are supposed to be straightforward summaries of what actually took place in a corporation, understandable by all. Right? Not quite. The balance sheet, income statement and a summary of cash flow are only summaries of the numbers. Much more detail is found (or hidden) in the footnotes to these statements.