By buying stocks, you are claiming a piece of the company's earnings or profit. As a fundamental analyst, your first thing is to evaluate following things to know how well the company has done financially: How much money it brought in, and how much it spent to operate, andAmount of profit it generated. If you have evaluated and invested right, then the company will … [Read more...] about How to analyze company’s profitability by using income statement
Finance
Financial tools to help you assess company’s liquidity position
Liquidity position of a company will tell you whether the organization has staying power in tough times. Analyzing company's liquidity position involves examining the relationship of current assets and current liabilities and in short run, how well a company can manage and fulfill its short-term obligations. In absence of adequate cash flow to the business, company may go … [Read more...] about Financial tools to help you assess company’s liquidity position
What is project finance and why its needed
Project finance is defined as funding of a single purpose long term infrastructure facility such as pipelines, power plants, highways, ports, metro systems, airports, hospital, chemical facilities, refineries and industrial plant that generates the cash flow to repay the debt as an independent economic unit. It can be formed as a separate legal entity to operate, construct … [Read more...] about What is project finance and why its needed
Understanding the Cash Flow Statement: A Beginner’s Guide to Company Liquidity
When you’re looking into a company’s financial health, one of the most important documents to check is the cash flow statement. It gives you a clear picture of how cash moves in and out of the company, helping to assess whether the company can pay its bills, invest in growth, and survive financially. In this article, we will break down the concept of a cash flow statement in … [Read more...] about Understanding the Cash Flow Statement: A Beginner’s Guide to Company Liquidity
Return on equity (ROE): How to calculate and its use
Assets are financed in part by liabilities and in part by equity. Value investors are not interested to know how much return the company gets from its total investment (debt plus equity), but rather they are interested in the return that the company generates on their shareholdings. To measure how the stockholders are fared during the year, return on equity (ROE) is … [Read more...] about Return on equity (ROE): How to calculate and its use
Why and How to develop a chart of accounts for your business
Chart of accounts is a list of accounts that a company has made available for recording financial transactions in its general ledger. It serves as an index of all the company’s financial accounts. Company can add accounts to it any time as needed. Chart of accounts is divided into balance sheet and income statement account, which is further grouped into assets, liabilities, … [Read more...] about Why and How to develop a chart of accounts for your business
Why and How to calculate current ratio
Investors judge a company by using various methods to know whether a company has adequate working capital. In this regard, current ratio is more useful than the net working capital. Current ratio (CR) is calculated by dividing current asset (CA) by current liabilities (CL). CR = CA / CL What is Current Assets and Current Liabilities To classify a particular asset as … [Read more...] about Why and How to calculate current ratio
Understanding the income statement of a company
Financial statements are prepared and reported by all listed companies to present the financial position for a period to the stakeholders. Financial statements of a company have five main parts: the balance sheet, income statement, cash flow statement, notes to accounts and shareholders / owner’s equity. In this article, we will be looking at the income statement. You will … [Read more...] about Understanding the income statement of a company
What is Operating cycle of a business
In a business, operating cycle is the length of time a company takes starting from the time when cash is invested in goods and services to the time that investment produces cash. This means in a business, it comprises three phases: Purchase raw materials in cash or credit and produce goods.Sell goods for cash or in credit.Collect cash from credit sales, settle short-term … [Read more...] about What is Operating cycle of a business
How cost of goods sold or COGS is calculated
Cost of goods sold is shown in the income statement of a company which is into manufacturing, wholesaling, retailing or into similar kind of business. Cost of goods sold or COGS is calculated by taking all direct expenses that a company has incurred to manufacture its product. After calculating COGS, you need to offset it against revenue to find out gross profit. In this … [Read more...] about How cost of goods sold or COGS is calculated