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Checking Important Company Fundamentals before Investing in a Stock

Part of the Stock Investing For Dummies Cheat Sheet

Before you buy stocks, you have to do a little research on the companies you're thinking of investing in. Pay attention to the following key components when you look at a company's main financial statements (the income statement and the balance sheet):

  • Earnings: This number should be at least 10 percent higher than the year before.

  • Sales: This number should be higher than the year before.

  • Debt: This number should be lower than or about the same as the year before. It should also be lower than the company's assets.

  • Equity: This number should be higher than the year before.

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