Learn how to analyze a Cash Flow Statement in <2 minutes. | Brian Feroldi posted on the topic | LinkedIn (2024)

This is freaking good! He just read my mind on how i segment it on each part of operating, financing and investing activities along with what's surplus and deficit. He did summarize everything into one sheet. Thank you so much Brian Feroldi! A strong cash flow company with good demand in the market is a good long term investment. If recession hits us so badly then re-balance your portfolio according to their cash flow. #TrailBLazerEmpire #Finance #Accounts

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Here’s a useful overview of cash flow statements from Brian Feroldi

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Cash Flow FormulasHow to analyze a Cash Flow Statement:The Cash Flow Statement shows a company's profitability at multiple levels over a period of time using cash accounting.3 Main sections:💰 OPERATING ACTIVITIESShows cash inflows & outflows from normal operations💰 INVESTING ACTIVITIESShows cash outflows from capital expansion & long-term investments💰 FINANCING ACTIVITIESShows cash changes to the company’s capital structure💳 LIQUIDITY RATIOSCash Ratio = Cash Balance ➗ Current LiabilitiesCurrent Ratio = Current Assets ➗ Current Liabilities⛱ COVERAGE RATIOSCash Coverage Ratio = Cash Balance ➗ Interest ExpenseDebt To OCF = Total Debt➗ Operating Cash Flow⚖ VALUATION RATIOSPrice to CFFO = Share Price ➗ Cash Flow From Operations Per SharePrice to FCF = Share Price ➗ Free Cash Flow Per Share➕ Follow me Brian Feroldi for more content like this.***📌 P.S. P.S. Want to level up your accounting skills? Join me for a FREE webinar on Wed, Feb 14th at 12:00 noon EST.Topic: 10 Metrics Every Investor Must KnowRSVP here: https://lnkd.in/eDeSEXjMIf you found this post useful, please share (repost ♻️) to help make LinkedIn a better platform for all.

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Learn how to create a cash flows statement in 3 minutes 👇 by Josh Aharonoff, CPA This may be one of the most impactful things I’ve learned in my career…Why?Because your statement of cash flows is an IMPORTANT report to produceIt shows where your cash has gone...and if properly attached to your forecast, can tell where you're cash is GOINGIt also helps you conceptualize how the the 3 financial statements are connected.➡️ How do you create a Cash Flows statement?Creating a cash flows statement from scratch is actually a very simple thing to do…And there are 2 ways in which you can produce a statement of cash flows1️⃣ The DIRECT methodThis method is easier to digest, as it shows cash flows in more plain English (ex: cash receipts from customers, cash paid to suppliers).Although it's easier to understand this report, it's much more challenging to create dynamically, and you'd need more information than just your income statement and balance sheet to accurately produce2️⃣ The INDIRECT methodThis method is presented by taking your net income, adding back depreciation & amortization, and then taking the differences in each of your balance sheet accounts.Although it may be tougher to read this report and fully grasp what's happening as compared to the direct method, it's MUCH simpler to produce...and all you need is your profit and loss and balance sheetIn this video, I show you how to produce a cash flows from scratch using the indirect method in just 3 minutes.I use my favorite technique for preparing this statement quickly, and that's by duplicating the balance sheet so that your formulas can be quickly & easily set up#accountingtips #accounting #financeandaccounting #financialaccounting #financialanalysis#finance

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Net Income vs Free Cash Flow - VisualizedThey are NOT the same thing!It took me a long time to grasp the difference.Seeing it visually helped me to understand it.Here's the key difference:💰 NET INCOME🔎 FOUND ON: Income Statement🔢 ACCOUNTING: Accrual➗ FORMULA: Revenue - All Expenditures = Net IncomeNet income measures a company’s profitability on the income statement using accrual accounting.It shows how much profit a company earned, in theory, during the period.It's an accountant's opinion of profit. Since it's an opinion, it can be easily manipulated.💰 FREE CASH FLOW🔎 FOUND ON: Cash Flow Statement🔢 ACCOUNTING: Cash➗ FORMULA: Operating Cash Flow - Capital Expenditures = Free Cash FlowFree cash flow measures the actual cash flow available to shareholders on the cash flow statement using cash accounting.It shows how much cash was generated by the company during the period.Since it measures actual cash generation, it's much harder to manipulate than Net Income.Remember: Net Income is an opinion. Free Cash Flow is a fact.Both numbers are important, but when forced to choose, I'll take free cash flow every time.Which questions do you have? Let me know in the comments section.***P.S. Want to go deeper into analyzing financial statements? Join me for a FREE webinar on 12/19/2023: The Investor's Guide To Financial Statements. RSVP here (it's free!): https://lnkd.in/etqqtJq7If this post was helpful, please repost ♻️ to make LinkedIn a better platform for all.

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Net Income vs Free Cash Flow

Cash Flow Statement: 8 Yellow Flags 🇳🇺Watch for these warning signs.1: EXCESSIVE STOCK-BASED COMPENSATION - Rule of Thumb: Less than 10% of revenue.2: LARGE CASH OUTFLOWS TO FUND WORKING CAPITAL- Rule of Thumb: Working capital outflows grow at the same rate as revenue.3: DECREASING OPERATING CASH FLOW- Rule of Thumb: Operating cash flow should grow at the same rate as revenue.4: LARGE DIFFERENCE BETWEEN NET INCOME AND FREE CASH FLOW- Rule of Thumb: Net Income and Free Cash Flow should track each other5: CAPITAL EXPENDITURES LESS THAN DEPRECIATION EXPENSE- Rule of Thumb: CapEx should exceed depreciation. 6: LARGE INCREASE IN DEBT- Rule of Thumb: Debt should be used sparingly7: LARGE ISSUANCE OF COMMON STOCK- Rule of Thumb: Common stock should be issued sparingly8: HIGH RELIANCE ON FINANCING ACTIVITIES- Rule of Thumb: Companies should fund themselves from operating cash flowNote: All of these are yellow flags for a reason. There could be good reasons to violate any of these rules, especially temporarily.If you see a yellow flag, investigate it further!Follow Brian Feroldi for more content like this.***Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Judging performance from a balance sheet involves analyzing key financial metrics and ratios to assess a company's financial health and stability. Here are some key indicators to consider:1. Liquidity Ratios: - Current Ratio:This ratio assesses the company's short-term liquidity by comparing current assets to current liabilities. A ratio above 1 indicates the ability to cover short-term obligations.2. Solvency Ratios: - Debt to Equity Ratio: Evaluates the proportion of debt to equity. A lower ratio is generally favorable as it suggests lower financial risk.3. Profitability Ratios: - Return on Assets (ROA): Measures how efficiently the company utilizes its assets to generate profit. - **Return on Equity (ROE):** Indicates the profitability of shareholders' equity.4. Efficiency Ratios: - Inventory Turnover:Reflects how quickly inventory is sold. Higher turnover is generally favorable. - **Accounts Receivable Turnover:** Measures how efficiently the company collects receivables.5. Asset Management Ratios: - Total Asset Turnover:Indicates the efficiency of using assets to generate sales. - Fixed Asset Turnover: Measures the efficiency of using fixed assets to generate revenue.6. Growth Indicators: - Year-over-Year Comparisons: Analyze how various balance sheet items have changed over time, indicating trends and growth patterns.7. Cash Flow Analysis: - Operating Cash Flow:Assess the company's ability to generate cash from its core operations. - Free Cash Flow:Examines the cash generated after accounting for capital expenditures.8. Working Capital Management: - Days Sales Outstanding (DSO): Measures the average number of days it takes to collect receivables. - Days Inventory Outstanding (DIO): Measures the average number of days inventory is held.9. Quality of Earnings: - Accruals: Analyze the level of accruals to assess the quality of reported earnings.10. Comparative Analysis: - Compare the company's performance against industry benchmarks and competitors to gain insights into its relative position.11. Consistency in Accounting Policies: - Ensure consistency in accounting policies over time. Changes may impact the comparability of financial statements.12. Capital Structure: - Analyze the mix of equity and debt in the capital structure. A well-balanced capital structure is usually more sustainable.It's crucial to consider these indicators in the context of the industry, business model, and economic conditions. Additionally, a holistic approach, combining balance sheet analysis with income statements and cash flow statements, provides a more comprehensive view of a company's overall financial performance.

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The Balance Sheet Explained SimplyThe master equation: Assets = Liabilities + Shareholder Equity⏰ TIME: Point in Time🔢 ACCOUNTING: Accrual3 Main Sections:💰 ASSETS: What the company Owns🔴 LIABILITIES: What the company Owes to creditors🔵 EQUITY: The net value of the owner's claim💰 ASSETSListed in order of liquidity (how quickly it can be turned into cash).CURRENT ASSETS: Expected to be used in <1 year→Cash→Marketable Securities→Accounts Receivable→Inventory→Other Current AssetsLONG-TERM ASSETS: Expected to be last >1 year→Long-Term Investments→Fixed Assets→Goodwill→Other Long-Term Assets🔴 LIABILITIESListed in order of when they are expected to be paid off.CURRENT LIABILITIES: Expected to be paid in <1 year→Payables & Accrued Expenses→Short-Term Debt→Other Current LiabilitiesLONG-TERM LIABILITIES: Expected to be paid in >1 year→Long-Term Debt→Other Long-Term Liabilities🔵 SHAREHOLDER'S EQUITYCAPITAL RAISED FROM INVESTORS→Preferred Stock→Common Stock & Additional Paid-In CapitalPROFITS RETAINED BY THE COMPANY→Retained Earnings→Treasury StockWas anything confusing? Please let me know below. I'll be happy to explain further.➕ Follow me Brian Feroldi for more content like this.***P.S. Want to level up your accounting skills? Join me for a FREE webinar on Wed, Feb 14th at 12:00 noon EST.Topic: 10 Metrics Every Investor Must KnowRSVP here: https://lnkd.in/eDeSEXjMIf you found this post useful, please share (repost ♻️) to help make LinkedIn a better platform for all.

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Do you understand your Balance Sheet, or does it look like just a bunch of numbers?This diagram will help you understand the meaning of accounts on the balance sheet, so you can make meaningful decisions.