Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Posted by jack_miller | Published 7 months ago

With 360 ratings

By: Mary Buffett, David Clark, et al.

Purchased At: $24.95

Mary Buffett and David Clark clearly outline Warren Buffett's strategies in a way that will appeal to newcomers and seasoned Buffettologists alike. Inspired by the seminal work of Buffett's mentor, Benjamin Graham ( The Interpretation of Financial Statements, 1937), this book presents Buffett's interpretation of financial statements with anecdotes and quotes from the master investor himself.

Potential investors will discover:

  • Buffett's time-tested dos and don'ts for interpreting an income statement and balance sheet
  • Why high research and development costs can kill a great business
  • How much debt Buffett thinks a company can carry before it becomes too dangerous to touch
  • The financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage - which he believes makes for the winning long-term investment
  • How Buffett uses financial statements to value a company
  • What kinds of companies Warren stays away from no matter how cheap their selling price

    Once audiences complete and master Buffett's simple financial calculations and methods for interpreting a company's financial statement, they will be well on their way to identifying which companies are going to be tomorrow's winners - and which will be the losers that should be avoided at all costs.

    Destined to become a classic in the world of investment books, Warren Buffett and the Interpretation of Financial Statements is the perfect companion volume to The New Buffettology and The Tao of Warren Buffett.

  • Mary Buffett was Warren's daughter-in-law for a period of time. She definitely takes advantage of the last name, but this book is great nonetheless. It is an excellent primer for understanding financial statements. It is separated into three primary sections covering balance sheets, income statements, and cash flow. Each section is broken up into numerous short chapters describing each line item. She ties in Buffett's strategy by giving examples of companies he has invested in and showing the financial numbers used to justify the investments.

    This is a quick read but very informative. Highly recommend for anyone interested in understanding the language of finance and some of the insights into Buffett's general investment strategy.

    - jake_mitchell

    This book simply walks through the financial statements as if they were being explained to a child. Furthermore, the author is incredibly repetitive and boring. If you have no prior knowledge of accounting or finance, this would be a good place to start to learn the basics (the only reason I gave it two stars), but other than that don’t waste your money.

    Also, makes a few fundamental errors... some of which include calling Acc. Deprecation a liability account (it is a Contra Asset Account) and replaces the “I” in EBITDA with income instead of interest.

    - sadie_peterson

    There are some insights here and there. But the rest can be skimmed through with not much to lose. I'm annoyed by the writing of this writer halfway as the sentences about how Buffet got rich become repetitive. Definitely not the most eloquent writer out there. But I got something quickly for what it's worth. Finish the book fast, couldn't wait to move on to another book.

    - alanna_nelson

    Read a Financial Statement with a dictionary and you would obtain same results as reading this book.

    - kimberly_murphy

    A deep but light dive in business success and sustainability drivers that makes great business. Simple but effective tools. I encourage business owners and investor to read it, as it gives a true and yet different dimension which makes or break an investment or business idea. It cuts clearly into what simply makes great investments, and /or successful management . I read several financial books that made a true difference in the co. I run, but this book gave a true different dimension that integrate financial knowledge for engineers like me.

    - teagan_howard

    This book teaches a reader who has no economic degree, in a very friendly manner, about the three main parts of a financial statement: balance sheet, income statement and statement of cash flows. The lessons are provided in a very detailed way, with tables and step-by-step explanations. This is in contrast to "The Little Book of Value Investing" by Christopher H. Browne and Roger Lowenstein, which also gives a framework to analyze financial statements for successful stock-picking, but does not teach the basics of understanding each and every line in the statements.

    This book is very different from the student's manual of corporate finance. It is very practical. It has a separate chapter for every main item of a statement, and explains with examples and advises how it affects prospects of the company and whether the stock of the company should be bought to get the extraordinary long-term results.

    This book also describes the differences between Benjamin Grahams way of picking stock and one derived by Warren Buffett.

    Many amateur investors are losing money because they have no basic education at least to understand a financial statement. They pick fashionable, hot stocks, or just stocks of a company which product they like. For example, they are passionate listeners to satellite radio and just because of that they buy "SIRI" regardless of the negative equity and negative operating income. Refinancing the huge debt in the credit crunch of 2008 is a challenge. This book will help the new investors to understand these issues and to make smarter stock picking. Of course, this book is not a panacea. Of course, there is always risk. The financial intelligence improves the odds. Thus, what is risky for one person is less risky to someone else. That is the primary reason to invest more in one's financial education than in the stock. The smarter you are the better chance you have of beating the odds. It is not gambling if you know what you are doing. It is gambling if you are just throwing money into a deal and praying. The idea in anything is to use your technical knowledge, wisdom and love of the game to cut the odds down, to lower the risk. So let this book will be brick in the foundation of financial education.

    In addition to this book, I can recommend the other (previous) books by Marry Buffett. They are very useful for the right stock-picking. I also recommend "Value Investing With the Masters" by Kirk Kazanjian and "The Only Three Questions That Count" by Kenneth L. Fisher.

    If you want to read something good about Warren Buffet's life and his investment strategy, I can recommend "Buffett: The Making of an American Capitalist" by Roger Lowenstein and "The Snowball" by Alice Schroeder.

    - hallie_harris

    This got me excited to learn more about investing and bookshelf my own portfolio. It isn't an all encompassing book but it's a good place to start. I would recommend it to anyone who wants to learn but doesn't know where to start

    - helena_thomas

    A truly nice introduction to the nuts and bolts of breaking down financial statements in the value investing style of Warren Buffett and Charlie Munger. There was of course some overlap with other Buffet books, but there were many details and concepts that were truly and newly useful to me. The concepts are straightforward but clearly highly effective (as Buffett himself mentions at various points in his letters and talks) - the key is having the character and temperament of sticking with a high earning company with a durable competitive advantage and cultivating the mindset to never stop learning. This book puts numbers to these concepts and give lots of clear examples - a big plus! An excellent book for the beginning investor.

    - briar_moore

    I cannot believe I fell for this. Without doubt the worst book ever written regarding accounting, financial statements or Warren Buffet. each chapter is about 2 pages, each covering a different element of the accts. A 10 year old could put together a more informative book. There is no depth of analysis, no insight, just the absolute basics of accounting. and by basics I mean , basics. gross profit, / revenue = gross profit margin.

    - aaliyah_cruz

    To buy good companies at a fair price, we need to know the financial strength of the companies. Going through financial statement and interpreting them line by line is important for value investing. This book shows us how to find a gold mine in financial statements.

    - wells_anderson

    I don’t normally leave reviews but I felt this book deserves it. This book is very much for beginners but that is what I am so it served it’s purpose great for getting me started. Everything is explained very well and in plain English , I am very happy with this book and would reckoned for anyone who is interested in getting started on finding great companies.

    - aiden_taylor

    I bought this book as an introduction to the intracacies of finance relating to shares. As a total newcomer this book has been invaluable. Mary Buffet is a gifted teacher, she assumes nothing and explains everything very clearly and simply. As a teacher myself I appreciate someone who has great knowlege who can explain complex subjects clearly. Not everyone can do this. If you are a novice like me who needs this kind of book then you will be very happy you bought it.

    If you are a more accomplished invester but want to understand how Warren Buffet uses parts of the balance sheet to find the profitable durable advantage companies that are the mainstay of his stock picking then this will be a great buy for you too.

    I have bought other books written by the author and look forward to reading them too.

    - parker_garcia

    I bought this book because I admire Warren Buffett and his simplicity to explain the corporate world.
    Readying his annual Letters to Shareholders made me want to explore more how he look at companies balance sheets, income statements and cash flows and how back in the seventies and eighties he was choosing the right investments.
    This book is the perfect beginning into Warren`s businesses world.
    After reading this book I am sure like me now you will jump into the next Warren`s bibliography.

    - athena_clark

    For those readers, such as myself, who wanted a relatively easy to follow and comprehend guide to the basics of Financial Statements I would recommend this book. The book is well structured and I found clearly written. In order to extract the best out of the book's content and lessons/advice I read it from start to finish in one sitting and then went through it all again with the financial statements of three live companies in front of me to really get to grips with the information, this worked for me, it may not work for anyone else.

    - rogelio_chavez

    Very nice to read books from the greatest investor of all time

    - mathew_gomez

    Overall a good book for beginners, with insights for non-beginners alike. Could have expanded more on the valuation methods of the last few chapters.

    - sloane_martin

    A succinct​ and straight forward book with very precise and important facts and way how to do it. An excellent job from the author.

    - skylar_davis

    if you are like me and don't have your accountancy exams then this book is a great place to start if you want to understand financial statements and see if the company you are looking at is another enron. it wont make you warren buffet, but it's a quick read and a good primer...

    - clyde_miller

    Good book

    - lizbeth_moore

    very good book, for every one wishing to understand the benefits of financial literacy

    - alessia_harris

    Enjoyed the book and learnt a lot about Buffets approach to investing, makes a good reference for buying new stocks.

    - jason_alvarez

    It is always good to review things from basic principles. This book is quick and easy to read, providing some key insights to research further. Greatly enjoyed reading this book

    - kenny_gomez

    Excellent, simple, easy to read.

    - valerie_gutierrez

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