Financial Report - Cash Flow

-
I noticed tend to forget the important points when reading the financial report. Hence, decided to write down important points to take note when reading the financial report. This is for my own good and at the same time can help and share with those who are interested.

The last part of financial report is Cash Flow statement. No matter how good the asset, if the company cannot service its debt, the company will fall in default. From the cash flow statement, we can know if the cash is flow in or out of the company.

Cash Flow statement divided into 3 sections, namely, Cash Flows from Operating, Investing and Financing.
1. Cash Flow from Operating shows the net income and any depreciation or amortization add back.
2. Cash Flow from Investing usually show negative, as the money spend to buy equipment or spend to maintain those equipment, we call them Capex or Capital Expenditures.
3. Cash Flow from Financing activities record down all the dividend payments or the company buy back it's shares. Here if negative is good for investor. However if the company issue shares or bond to have the positive cash flow, it's not good for investor as their share holding are diluted, unless the company able to demonstrate this will create share holder's value.

We are more interested to know what is the Free Cash Flow for the company. The formula for Free Cash Flow is Cash Flow from Operating minus Capex.

Free Cash Flow = Cash Flow from Operating - Capex

Red Flag: Be aware if the Free Cash Flow have a big swing. For example, from 2.4 million suddenly drop to negative 3.4 million, this may sound like.... something fishy!
.


Comments

  1. UnknownApril 20, 2014 at 1:10 AM

    Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
    Positive cash flow investments USA

    ReplyDelete

Post a Comment

Popular posts from this blog

How to Sell or Buy Odd Lot using iTrade?

-
Image
How to Sell or Buy Odd Lot by using Cimb iTrade Apps? Just refer to below print screen: 1. From the iTrade screen, press on the button call " Normal Broad Lot " 2. From the list, select " Normal Odd Lot ." 3. Now the screen will show " Normal Odd Lot! " and just key in order to buy or to sell. P/s:  for web site, just refer to below print screen:
Read more

Free Charting for Malaysia Stock

-
Image
Basically for stock market investors, some of them like to use technical analysis, whereas others prefer fundamental analysis. I am between two of the group, meaning, I like to combine both fundamental and technical analysis. Malaysia stock market are consider very young and most of investors are still in the learning stage. Sometime, they hardly find any website which provide free chart tools. Unlike US market, we can find a low of them, one of the famous charting tools for US is Stock Charts (http://stockcharts.com/) However, when you key in the company's name listed at Bursa Malaysia, it will not show you any result. If you have CIMB trading account, you can access free charting under the iTrade screen, all you need to do is select Chart --> Analysis Chart.   Then system will show you a technical chart like below: Ok, now what happen if you do not open share trading account with CIMB ? Or sometime, you don't want to sign on the website of your CIMB trading a/c ?
Read more

Bursa Anywhere App

-
Image
Bursa Malaysia has launched “Bursa Anywhere App and eStatement Sign Up” campaign from 1 st  January 2022 until 31 March 2022.   Get  RM5.00 TNG eWallet Reload Pin  when you download Bursa Anywhere mobile application and enroll for electronic statement during campaign period.    For more info, please refer to the attached terms & conditions or visit  https://www.bursamarketplace.com/anywhere/
Read more