I was reviewing the article from the Stock Advisor Vol. 7, Issue 8 (August 2008), entitled "Back to the Basics With the Balance Sheet," and needed a few points clarified. Under Net Debt in the "Breaking It Down," section, the article says "Apple actually has more than 19.4 billion in net cash." How come none of Apple's liabilities were used in calculating net cash? Is total debt different from total liabilities? If so, what is the difference? This leads to my next question. In the section Debt-to-equity, the article states Apple's debt-to-equity ratio is a nice fat zero. This is only true if we only use long-term debt in the calculation. My calculation shows a debt-to-equity ration of .688, which I got by dividing 12,418 by 18,053. This article would have been more helpful if the actual calculations were included. Also, what is a strong vs. fair vs. weak debt-to-equity ratio in pure numbers? The article is vague, saying "the lower the ratio, the greater the company's long-term obligations." How reliable is balance sheet on its own? I have read the articles on income statements and cash flow statements (Sept and Oct. 2008, respectively). If I were to analyze all three of these financial statements and carry out all of the calculations recommended for each statement for all of the stocks I am considering investing in, this would take an incredible amount of time. Is the balance sheet the most telling of the financial statements? Would it be reasonable to do the three calculations covered on the balance sheet and just choose the most important one for the other two (ex. net margin for the income statement and free cash flow for the cash flow statement)? In the past, I have chosen investments based on the recommendations from Stock Advisor and articles on Motley Fool, as well as a basic understanding of the company and the price of the stock. However, as I prepare to invest more money I wanted to do some more in-depth research, i.e. looking at financial statements before making any decisions.
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