What is the importance of the P&L A/c and balance sheet for investing one's money in various companies? How to choose the company through the performance of balance sheet? The article focuses on the above questions and discusses the importance of ratios.

Rahul is upbeat after obtaining valuable advise from his friend Sachin, a CA and wealth management consultant, on investments in the share market. Rahul, who is now very clear about the stock market concepts, wants to start investing in shares right away. However, Sachin advises him to read about and thoroughly understand the primary and secondary markets. Sachin also advises him to read the companies' annual reports and Rahul goes by his friend's advice. While he is able to understand balance sheet and profit and loss account, he is unable to make much about the soundness of the companies. He is, therefore, keen to know more about the subject and decides to get back to Sachin.

Rahul rings up Sachin and tells him that he needs further clarifications. Sachin invites Rahul and wife home for lunch stating that it was his turn and fixes next Sunday. On the following Sunday Rahul and Deepika are at Sachin's house. After exchanging pleasantries Rahul comes to the topic straight away.

Rahul: I have started reading annual reports of companies regularly. I have certain doubts on the impact of factors that need to be kept in mind while selecting the right company.

Sachin: Good question. I appreciate your keenness. It shows your focused approach to implement your retirement plan.

Portfolio Organizer Magazine, Voluntary Retirement Scheme, VRS, Wealth Management, Global Stock Market, Primary Markets, Secondary Markets, Financial Tatio Analysis, Assets Turnover Tatio, Gross Profit Ratio, Interest Coverage Ratio, P/E ratios, Indian capital structure, industrial policy, Multinational Corporations, MNCs, Earning Per Share, EPS.