Can Financial Statement Information Be Used to Successfully Pick Stocks?
Response to the following problem:
For most companies, the only reliable source of information about the company's performance is found in the company's financial statements. However, for the 15,000 publicly-traded companies in the United States (those whose ownership shares can be bought and sold on a stock exchange), there is much information generated by business reporters and financial analysts to supplement the financial statements. In addition, ownership shares of these publicly-traded companies are bought and sold by investors, large and small, every day. For these publicly-traded companies, can the financial statements be used to pick winning and losing stocks, that is, those stocks that will go up in value and those that will decline in value in the future? Explain.