Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage
I am an accounting and finance professional with 10 years' experience in advising clients on cross-border merger & acquisition transactions, international tax structuring and business model optimizations. I read companies' financial statements regularly to gain understanding of a company's business operation, source of revenue, financing situation, cash flow, global effective tax rate, and etc. I wanted to read a book about interpretation of financial statements from investors' perspective, so I picked up "Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage".
This book is written by Warren Buffett's former daughter-in-law Mary Buffett and a successful Buffettologist David Clark. The authors have written a simple guide for reading financial statements from Warren Buffett's successful perspective. With 57 short chapters, the book illustrated what Buffett would look at when buying a business. He looks at the company's pre-tax earnings and asks if the purchase is a good deal relative to the economic strength of the company's underlying economics and the price being asked for the business.
This book is an easy read to learn Buffet's time-tested dos and don'ts for interpreting an income statement and balance sheet, 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, and what kind of companies Buffet stays away from no matter how cheap the price is.
Overall, I think this is a good book. I enjoyed this book because it introduced to me Warren Buffett's methodology for reading financial statements. If you aren't experienced with reading financial statements, I would highly recommend this book as a great place to start.
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