A firm that continually finances operations through long-term debt will soon run into trouble at some point down the road. Long-term debt all all other items in financial statements for that matter should be compared to previous years amounts. Any considerable changes should alert investors to adjust their perception of the firm accordingly. The shareholders equity portion of the balance sheet should also be analyzed. The shareholders equity section contains the firm's capital stock book value and a retained earnings balance.
Investors can use the capital stock information to evaluate the companies book value per share.
More on this calculation is provided in the key ratios section of this site. Book value gives investors an indication of what each share is worth according to the company's financial statements. This can be compared with the company's market value, but this may be difficult to do with high growth companies or firms that are considered to be knowledge based. The retained earnings section gives investors an idea of the amount of earnings that the company has retained for reinvestment in the firm. Changes and amounts used for various capital expenditures should be evaluated by the investor.