Originally posted by Janak.merchant1   Reading only annual reports is not sufficient in taking investment decisions. What Warren does (reading A R ) is just one step. And he knows that He does not stop there.

From personal bad experience, I guess knowing what NOT to read is also an important step.

saw a new book that might be relevant here..

Vivek Jee,
I am very eagerly waiting for your post on the Various Financial Ratios..
Please take out some time whenever possible to enlighten us..
This thread is so important to us non-financials that I open and see it everyday to see if there is anything new by Basant Jee or Vivek Jee..

I read through this thread and must congratulate you, Vivek, for not only starting the thread but also for providing regular inputs which are very useful for investors who do not have a background in finance or accounts.

For a long time, the only part of the Annual Report I read (or understood) was the P/L statement to find out how much dividend was being paid. Later I learned to read the Reports on Accounts, Director's Report and Management Discussions.

Now I go straight to the Cash Flow statement to find out exactly how much cash the business is generating and what they are doing with it. Unless a business has strong operational cash flows, I remove it from my 'watch list'.

All other figures can be - and often are - fudged, but the cash flow is difficult to fiddle with.

The importance of the cash flow statement has been highlighted in Pat Dorsey's book: "The Five Rules for Successful Stock Investing" - an excellent primer on fundamental analysis.

I would highly recommend that investors learn how to read and analyse the Cash Flow statement.