[Review of "Fellow Investor Help ④"] What are the pitfalls in financial reports? Just looking at profits is not enough!!!

It's earnings season, and Finance Bear is sharing his own experiences to show fellow investors the losses he has suffered from reading earnings reports.

[Study Time]

Click here to learn from common pitfalls →[Fellow Investor Assistance 4] Help Finance Bear Avoid the Traps in Financial Reports!

Click here to dive into the course →[Advanced Stock Course: Master Company Financial Reports with Ease]

[Analysis of Finance Bear's Pitfalls]

Looking solely at the financial report, we can draw the following surface-level conclusions:

1. Net profit: Turned from a loss to profitability in 2021. 2. Operating revenue: Has declined year by year. 3. Fixed assets: Have decreased annually.

Consequently, upon seeing the significant year-on-year increase in net profit in 2021, Cai Xiaoxiong’s eyes lit up with excitement, and he concluded that the strawberry cold-drink business was profitable, immediately deciding to increase his holdings.

See? This warehouse step was incorrectly added, wasn’t it?Does an increase in net profit necessarily mean the company is generating earnings? Is that always the case? Not at all.

@Toto MoneyClassmate, by looking beyond the surface to get to the essence, you've distilled four key points of vigilance.

@冷靜的心境Classmate, it has been calculated that the core business of strawberry cold drinks has been operating at a loss for consecutive years.It was only by selling fixed assets to raise cash that the company turned a profit in 2021.

Here's a word of caution: When a company decides to sell fixed assets to raise cash, it should exercise a bit of vigilance!!!

One reason for the increase in Strawberry Cold Drinks' 2021 profits was the gain on disposal from the sale of fixed assets.

@仁慈的卡比牛A classmate proposed,Selling the cultivation base is unsustainable; if you sell it this year, there will be none left next year.

@dc_soaringClassmate, from another perspective, the cultivation base where the strawberry cold drinks are sold is very likely the upstream raw-material supplier.

It is anticipated that shortages in raw material supply and declines in quality may arise in the future.It has also affected the stability of the core business.

Let's move on to the next breaking news item. What else can a company do to reduce its losses and make its financial statements look better?

@抱富Classmate, when it comes to the quickest and most direct solution, it's "cutting off an arm to save the body"—that is, boosting revenue while cutting costs. Simply put, it means downsizing staff and closing underperforming stores.

With the sharp decline in the number of stores, the volume of cold-drink operations is bound to be affected.This is a sign of corporate insecurity.

Strawberry Cold Drinks Co., Ltd. has been unable to sustain its performance amid a downturn in the industry and has steadily declined, relying on asset sales to artificially boost its earnings.

So, fellow investors, have you learned anything? Next time you encounter the same situation, don't be as reckless as Cai Xiaoxiong!

[Friendly Reminder]

Life isn't easy—stock investors sigh. Will you, like Cai Xiaoxiong, ever run into problems you just can't solve on your own?

Don't be shy—just say it boldly!Post your question with the hashtag #[Fellow Investor Help],Fellow investors from all walks of life are here to help you!

[Reward Distribution]

Helping Others Award: All participating fellow investors (who meet the requirements) have already been awarded 6,666 points.

Best Recommendation Award: These 5 Students@Toto Money @仁慈的卡比牛 @冷靜的心境 @dc_soaring @抱富, receive one NiuNiu merchandise item.

30K Views