Chapter 4: Analysing Financial Statements. A thought.
I was revising Chapter 4 today and writing down some key concepts for Assessment #2 and wanted to share this little nugget of joy I stumbled across in the process.
In the case of business, reflecting on the past is a way of informing decision making. We can’t see into the future to decide how we might invest our money into firms so drawing on the past can provide valuable insights to inform decision making.
I can liken this concept to good old fashioned and slightly terrifying Double Dutch Skipping. You can spend ages analysing the frequency and consistency of the skipping ropes to time your jump-in with varying degrees of success or (for me anyway) devastating failure. As with equity investing, sometimes it won’t matter how much analysis of past patterns you do, you can’t predict the future and you might get hit in the face with a skipping rope.