I've been tutoring series 65/66 exam candidates a LOT lately, and one area most seem to struggle with is fundamental analysis. Not sure why so many people are intimidated by the income statement, balance sheet, or statement of cash flows. If you're a business owner, pull up Quickbooks and print your financial statments--how did you do last quarter or last year in terms of sales and profits? That's your income statement. What's your current financial condition in terms of assets and liabilities? That's your balance sheet. If you took a lot of depreciation expenses on your income statement, you might want to see how much cash you generated on the statement of cash flows; or, you can just take your net income after tax on the income statement and add back the depreciation you took on equipment, real estate or other fixed asset.
What's any of this got to do with RIMM/Research In Motion/BlackBerry? Take a look at this scary snippet from a recent headline on the company: "Following quarter after quarter of slashed financial outlooks and missed targets, the company made the ominous choice to discontinue making future predictions about its BlackBerry sales or profit." Huh? What IS a share of common stock? As your exam might say, it's merely a claim on any earnings/profits/dividends the company might have. Well, at RIM right now, there's none of that going on. Last year they made a profit of $934 million; this year they LOST $125 million. So, a share of RIMM right now is a share of a profit that comes in just south of ZERO. Will the company turn around? Here's another snippet: The new CEO said the next several quarters will be difficult ones as the company transitions to a new, bet-the-house platform called BlackBerry 10. That is still on track to become available at the end of the year -- far later than RIM initally planned." Oh, great--so it all comes down to this new platform, and that platform is already suffering release delays. Even if the thing does work out, there will almost certainly be negative news items pushing this stock down indefinitely. Then again, maybe you're a value investor, and you see hidden assets on the balance sheet. Maybe you just feel that sales will improve again, that this "loss" is really due to a one-time event, and as the news drags the stock price down, you load up your shopping cart and just wait for the inevitable turnaround that inconveniently hasn't taken place yet.
Or, you care NOTHING about the COMPANY called Research In Motion because you use technical analysis. Regardless of what the company does, you just trade the stock RIMM based on its price patterns, volume levels, 200-day moving average, what have you. Whatever the case, try to use the financial news to help clarify what you're studying. If you go into the testing center with no real-world understanding whatsoever .. . well, try not to do that. The passing score on the Series 65 exam is 72%; the passing score on the Series 66 exam is 75%. Overstudy?