Understanding Financial Reports: Easier than you Think

It's been a year since I discussed financial statements with you (see the June 27, 2006, issue of Financially Fit), but two recent events prompt me to reengage this subject:
 
The first is that the market is reaching new highs almost daily and many investors wonder whether they should exit their stocks, while those who didn't join in this latest bull trend wait on the sidelines, pondering the question of whether it's too late to cast their lot with the market.
 
As you know, I am a bottoms-up investor. I believe that it's the company that counts - overall - and that a long-term investor without an intimate knowledge of the companies in which he invests is not going to be a successful investor.
 
And part of that tool kit is the ability to understand the financial reports of your current holdings or potential investments. This is essential knowledge that is the first building block required to determine when to cash out or when to jump into a stock. A few minutes spent perusing a company's financial statements will give you a very good idea of the company's historical performance, as well as its future prospects - much more important data in the long-run than the cyclical maneuverings of the stock market.
 
The second event that underscores the importance of understanding financial statements is the fact that this is going to be a record

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