roe - on its own, it can mislead badly, page-7

Hi PP, I enjoy following your posts and am glad you're adding to this instructive piece. An example of a high quality business with <10% ROE is Sydney Airport (SYD). The reason being that someone else had previously forked out all that equity which is now available for cheaper on the market and also by way of how its equity has been calculated. A number of infrastructure stocks have a similar setup I believe.

Cam's point on cash (specifically OCF) being king is a standout for investing newcomers. There are times in a good company's life when it will have negative OCF, depending on volatility in BAU payments timing or after acquiring a loss making entity with a view to a turnaround. In all such instances, these are I-O-U's. Assess them as such, thinking like a creditor, not a speculator; i.e. don't try if you've researched minimally.

Every line in an annual report has possibility of being deliberately gamed or, to the benefit of the well studied, be misleading due to poor fit with IFRS. The most irritating part of reading company reports is how often little is disclosed about internal modelling, key assumptions & their materiality. The part which has least assumptions (since it must tie back to changes in cash & cash equivalents) is the Statement of Cash Flows. I realise I'm verging on accounting-speak, which also hints that unless you're prepared to know the "lies in the lingo" by brushing up on accounting, just follow the cash trail under Statement of Cash Flows to avoid the clangers.