Learn to Read Financial Statements with Sandeep Kumar Chaudhary’s Step-by-Step Guide

learnwithopen .ai

Thu, 16 Oct 2025

In Nepal’s fast-growing stock market, many traders rely on price charts, rumors, or social media discussions to make investment decisions. However, very few understand the true language of business — financial statements. Without reading a company’s reports, no trader can fully know whether they are investing in a strong, sustainable business or a speculative bubble. This is why Sandeep Kumar Chaudhary, Nepal’s first complete technical and fundamental analyst, has made it his mission to teach investors the art and science of financial statement reading. Through his education platforms, MarketMind Investment Group and NepseBook, he provides a practical, structured, and easy-to-follow guide that helps traders and investors read financial statements confidently — turning data into decisions and numbers into profits.

According to Sandeep Kumar Chaudhary, a financial statement is the heartbeat of a company. It reveals everything the price chart hides — from profitability and liquidity to debt burden and management discipline. He often says, “Charts show psychology, but financials show reality.” His step-by-step method bridges the gap between accounting and trading, allowing even beginners to analyze companies scientifically rather than emotionally. His goal is to create data-driven investors who can read a balance sheet like a banker and a profit statement like a professional analyst.

He begins his process with the Income Statement, which represents a company’s performance over a specific period. Here, Sandeep focuses on total revenue, net profit, and earnings per share (EPS) — the three most critical indicators of financial strength. He teaches that growing revenue and stable profit margins are signs of operational health. However, he cautions traders not to fall for short-term spikes in profit caused by extraordinary income, such as asset sales or accounting adjustments. Instead, he looks for consistent core profitability — income generated from actual business activities. EPS, he explains, is especially important for NEPSE investors, as it reflects how much profit each share earns and determines future dividend potential. A steady rise in EPS across multiple quarters is one of the clearest signs of a fundamentally strong company.

After analyzing profitability, Sandeep moves to the Balance Sheet, which he calls the “financial backbone” of the company. It provides a snapshot of what the company owns and owes — its assets, liabilities, and shareholder equity. Here, he looks at capital adequacy, net worth, and debt-to-equity ratio to assess the company’s long-term financial health. In the banking and insurance sectors, he pays special attention to the Core Capital Ratio (CAR) and Capital Adequacy Ratio (CRAR), which indicate whether a bank has sufficient capital reserves to absorb risks and comply with NRB regulations. A strong capital structure means stability, the ability to expand operations, and a higher chance of regular dividends or bonus shares.

Another key component of his framework is the Cash Flow Statement, which Sandeep describes as “the reality check.” Many companies can show profit on paper but struggle to maintain real cash flow. He emphasizes analyzing cash flow from operating activities, which shows how much money the company’s core business actually generates. Positive operating cash flow indicates that the company is earning real cash, paying its debts, and maintaining liquidity. In contrast, consistent negative cash flow despite reported profits is a red flag — it may indicate weak receivable collection, over-leverage, or mismanagement. He also looks at investing cash flow to see where the company is deploying its resources — whether it’s expanding capacity or repaying loans — and financing cash flow to check for debt repayments or dividend payouts.

Once the three main financial statements are understood, Sandeep moves on to key financial ratios, which he calls “the summary of truth.” These ratios help simplify analysis and comparison across companies. He focuses on Earnings Per Share (EPS), Price-to-Earnings (P/E) ratio, Return on Equity (ROE), Debt-to-Equity (D/E), and Current Ratio. He teaches that higher EPS and ROE mean efficient management, while a very high P/E ratio could indicate overvaluation. A healthy current ratio (typically above 1.2) shows good liquidity, while a low D/E ratio reflects controlled debt exposure. Instead of looking at one ratio in isolation, Sandeep emphasizes comparing ratios across several companies within the same sector. For example, if NMB Bank’s ROE is 18% while another bank’s ROE is 10%, the higher value indicates better capital efficiency.

A unique feature of Sandeep Kumar Chaudhary’s approach is that he integrates regulatory understanding into financial analysis. He insists that investors must read financials in light of NRB directives, Beema Samiti guidelines, or SEBON regulations. For instance, if NRB tightens provisioning rules or increases the Credit-to-Deposit (CD) ratio, banks might have to retain more profit and distribute less dividend. Similarly, Beema Samiti’s rules on insurance reserves can impact profitability and dividend announcements in that sector. By combining policy reading with balance sheet interpretation, Sandeep turns regulatory events into investment signals — helping investors stay ahead of market reactions.

He also teaches how to identify growth opportunities and red flags. A company with rising total assets, consistent profit margins, and healthy cash flow is a long-term winner. On the other hand, falling EPS, rising debt, or irregular dividend history signals instability. Sandeep calls these “pre-warning signs,” explaining that financial deterioration often appears in reports months before price declines. His students learn to detect such weaknesses early, protecting their portfolios from hidden risks.

However, what truly sets his teaching apart is how he blends fundamental and technical analysis. After identifying fundamentally strong companies through financial data, Sandeep uses technical tools — such as market structure, order blocks, and liquidity zones — to determine when to enter. For example, if a fundamentally sound bank stock is trading near a long-term support or order block zone, he considers that a strategic accumulation opportunity. This alignment between strong fundamentals and favorable technicals creates what he calls “perfect confluence entries”, offering both safety and precision.

Through his sessions at MarketMind Investment Group and NepseBook, Sandeep conducts live demonstrationsusing NEPSE companies’ quarterly and annual reports. He explains how to extract key data, calculate ratios manually, and interpret every section of the report — from income statements to cash flow trends. Even students without an accounting background can follow his framework easily. His approach empowers them to make decisions based on data, not emotions, and to recognize that true investing is built on logic, patience, and understanding.

Sandeep’s philosophy is simple yet profound:
“A trader follows price, but an investor follows proof. The numbers never lie — they reveal everything if you know how to read them.”

Under his mentorship, hundreds of Nepali investors have transformed their trading journey. They now understand that the real secret to financial freedom is not chasing news but mastering financial literacy. Reading financial statements is no longer an intimidating task — it has become the most powerful tool for identifying long-term opportunities, avoiding traps, and building wealth systematically.

Through Sandeep Kumar Chaudhary’s step-by-step guide, Nepali traders are learning that the market rewards knowledge, not luck. Financial statements are not just reports — they are the map to a company’s future. By learning to read them the right way, investors are discovering that every successful trade begins not on a price chart, but on a balance sheet.