Investment Analysis: valuation concepts and research

01

Research, not picks: what a company publishes

In simple words

Before you buy a used bike, you look at it closely: the tires, the brakes, the chain. You also ask who is telling you it is a good bike. Investment analysis is the same: look at the facts the company reports, and ask who is talking and why.

Before this course: Portfolio Concepts: diversification, costs and behaviour (course 5.4.2), which builds on Investing Basics: Stocks, ETFs and Risk (course 5.4). You already know asset mix, diversification, fees, volatility, rebalancing and behavioural biases. This course goes one step deeper: how to read the information behind a single company and how to judge evidence. It is about understanding, not choosing.

Key facts

A complete set of financial statements has these parts (names can differ):
Statement of financial position (the balance sheet): a summary of the company's position at a point in time: assets, liabilities and equity.
Statement of profit or loss and other comprehensive income (the income statement): revenue, expenses and net income over a period, usually a quarter or a year.
Statement of changes in equity: what caused equity (net worth) to rise or fall.
Statement of cash flows: cash from operating, investing and financing activities. It shows whether the company generated actual cash.
Notes to the financial statements: the accounting policies, judgments and estimates used (lesson 5).
MD&A (Management's Discussion and Analysis): the part of the annual report where management explains how the company is doing, its outlook and its risks. It is management's own view, so read it next to the numbers.
Primary sources are the company's own filed reports. Secondary sources are articles, videos, posts and analyst reports about the company. GetSmarterAboutMoney advises treating social media as the first step in gathering information, not the only step.
A financial claim that does not match what the company has filed with securities regulators is a warning sign.
Analysis can explain what happened and what a price assumes. It cannot tell you what will happen next.

Question	Where to look first
Did the company make a profit?	Income statement
What does it own and owe?	Balance sheet
Did it bring in real cash?	Cash flow statement
How were the numbers made?	Notes
What does management say about risks?	MD&A

Step by step

Pick any large public company you have heard of (for practice only, not to buy).
Search the company's name plus "annual report" and open the investor relations page on the company's own website.
Find the annual report and list the names of the statements it contains.
Find the MD&A (it may be in the annual report or a separate document) and write one risk management mentions.
Write the reporting period (for example, the year ended December 31).
Check: you have five statement names, one risk and one period. You have not bought anything.

Watch on YouTube

How to read financial statementsThe Finance Storyteller · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01Research, not picks: what a company publishes

LESSON 01 / ANIMATED LESSON / AI VOICE00:00 / 01:00

Voice

Read the video script

[Host] "Before you trust a story about a company, read what the company itself reported."
[Text on screen: balance sheet / income statement / cash flows / equity / notes] "A financial report has a balance sheet, an income statement, a cash flow statement, a statement of changes in equity and the notes."
[Text on screen: MD&A = management's view] "The MD&A is management explaining results and risks, in their own words."
[Text on screen: social media = first step, not the only step] "Posts and videos can be a first step. The filed reports come next."
[Host] "This is research. It is not a pick."

Try it now

Make the "question and where to look" table for one real company's annual report. Write the page number where each statement starts.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Investment Analysis: valuation concepts and research" on The Future Market. Lesson 1: "Research, not picks: what a company publishes".

What the lesson teaches:
- A complete set of financial statements has these parts (names can differ):
- Statement of financial position (the balance sheet): a summary of the company's position at a point in time: assets, liabilities and equity.
- Statement of profit or loss and other comprehensive income (the income statement): revenue, expenses and net income over a period, usually a quarter or a year.
- Statement of changes in equity: what caused equity (net worth) to rise or fall.
- Statement of cash flows: cash from operating, investing and financing activities. It shows whether the company generated actual cash.
- Notes to the financial statements: the accounting policies, judgments and estimates used (lesson 5).
- MD&A (Management's Discussion and Analysis): the part of the annual report where management explains how the company is doing, its outlook and its risks. It is management's own view, so read it next to the numbers.

The exercise I'm working on:
Make the "question and where to look" table for one real company's annual report. Write the page number where each statement starts.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
4. This is for learning only. Remind me to check with a licensed professional before I make a real decision about my own money, health or legal situation.

I'm a parent helping my child (about 8 years old) with a lesson called "Research, not picks: what a company publishes" from the course "Investment Analysis: valuation concepts and research".

Here's what the lesson says:
Before you buy a used bike, you look at it closely: the tires, the brakes, the chain. You also ask who is telling you it is a good bike. Investment analysis is the same: look at the facts the company reports, and ask who is talking and why.

The activity:
Make the "question and where to look" table for one real company's annual report. Write the page number where each statement starts.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Keep it general and educational. This is not advice for a real situation.

Open Claude

Sources

GetSmarterAboutMoney, Financial statement basics: www.getsmarteraboutmoney.ca/learning-path/stocks/financial-statement-b
GetSmarterAboutMoney, How to evaluate investing information found on social media: www.getsmarteraboutmoney.ca/learning-path/getting-started/investing-us
US SEC, Beginners' Guide to Financial Statements: www.sec.gov/about/reports-publications/beginners-guide-financial-state

My notes

I learned this

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