Statement of cash flow is a reconciliation of the cash flows from the firm’s three sources: operating, investing and financing. Analyzing these activities is extremely important as it provides investors a reconciliation of the beginning and ending cash position on the balance sheet. In our last article, we have discussed how to calculate cash flow from operating activities … [Read more...] about How to calculate cash flow from investing and financing activities
Accounting
How to calculate cash flow from operating activities
Cash flow from company's operating activities shows the investors the amount of money a company brings in during the normal course of business. Operating activities are the most complex of the three sources shown in a statement of cash flow. This statement is prepared by taking the company's net profit shown in income statement and then a number of additions and … [Read more...] about How to calculate cash flow from operating activities
Relevance of financial statements in fundamental analysis
Financial statements are the cornerstone of fundamental analysis. It has three key financial documents: the income statement, balance sheet, and statement of cash flows. Publicly listed companies are required to follow financial reporting rules of the country in which they are listed. Most of these stock exchanges and financial rules in the country require companies to … [Read more...] about Relevance of financial statements in fundamental analysis
What is fundamental analysis and why it’s used by investors
Fundamental analysis is a process of analyzing every aspects of a company's operations in order to determine the value of a stock, known as intrinsic value of a share. This means, it will let you know what you are getting when you buy a stock. By using fundamental analysis, you can find out whether a stock is cheap or expensive by comparing its current market price to the … [Read more...] about What is fundamental analysis and why it’s used by investors
How to analyze company’s profitability by using income statement
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
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
What is statement of cash flows and why its prepared
In accrual accounting system, income is reported when earned, not necessarily when cash is received. For example, when company made sales on credit, right to receive money in future is created in exchange of goods or services. These transactions are recorded on the income statement as revenues / sales. However in these type of cases, company has not received any money at the … [Read more...] about What is statement of cash flows and why its prepared
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