---
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40273232.md"
description: "Novices look at the income statement, experts look at the cash flow statement and the balance sheet.So, how to look? Methodology:1. First, see if the profit is supported by cash:Operating cash flow / Net profit attributable to parent companyCash received from sales / RevenueWhether accounts receivable deteriorate along with revenue, or actually decrease when revenue grows2. Then, see if the position of working capital is correct:Accounts receivable decrease + Cash collection strengthens: Real demand, strong bargaining powerInventory rises + Construction in progress rises: Indicates the company is preparing for future deliveriesContract liabilities / Prepayments rise: Indicates orders are starting to turn into cash and production actions3. Next, see if capacity is already expanding:Construction in progressFixed assetsCash paid for the purchase and construction of fixed assets4. Finally, see if the expansion is risky:Net debtChanges in short-term/long-term borrowingWhether financial expenses are starting to significantly erode profitsThe logical chain is as follows:Real orders -> Cash comes back first -> Accounts receivable don't deteriorate -> Inventory and construction in progress rise -> Capital expenditure surges -> Subsequent continued capacity expansion materializes"
datetime: "2026-04-29T01:10:06.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40273232.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40273232.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40273232.md)
author: "[佩宁渊瑾财商成长系](https://longbridge.com/en/profiles/17154496.md)"
---

# Novices look at the income statement, experts look…


## Comments (6)

- **大盗贼霍臻普洛兹 · 2026-04-29T04:30:13.000Z**: A small accountant with 16 years of experience passing by, I think it's all about speculating on human nature.
  - **佩宁渊瑾财商成长系** (2026-04-29T05:24:33.000Z): Yes, human nature, a multidisciplinary interweaving, ultimately it's emptiness, haha.
- **大盗贼霍臻普洛兹 · 2026-04-29T04:28:39.000Z**: I looked at the three financial statements and footnotes, and the result is that my stock trading is a complete mess😭
  - **佩宁渊瑾财商成长系** (2026-04-29T05:24:49.000Z): Just one of the subdivisions, constantly learning
- **金渐层铲屎官 · 2026-04-29T02:04:04.000Z**: The financial accounting class keeps replaying in my mind over and over🤯
  - **佩宁渊瑾财商成长系** (2026-04-29T02:25:16.000Z): With AI, it can actually help realize many curiosity-driven ideas.