Long Term Mindset on LinkedIn: 7 Cash Flow Ratios Earnings are an opinion. Cash is a fact. Watch these… (2024)

6 CASH FLOW RATIOSEvery investor should know:1: CASH FLOW TO DEBT RATIOTotal Debt ➗ Cash Flow From Operations→Indicates how long it would take a company to repay its debt if it devoted all of its cash flow to debt repayment.2: OPERATING CASH FLOW MARGINCash Flow From Operations ➗ Net Revenue→Compares a company's operating cash flow to its net revenue over a specified period.3: FREE CASH FLOW YIELDFree Cash Flow ➗ Market Capitalization→Indicates how much cash a company generates relative to its market value.4: FREE CASH FLOW TO SALES RATIOFree Cash Flow➗Net Revenue→Indicates how much cash a company generates relative to its sales.5: FREE CASH FLOW CONVERSIONFree Cash Flow ➗ Net Income→Indicates the amount of net income the business converts into free cash flow6: PRICE TO FREE CASH FLOW RATIOMarket Capitalization ➗ Free Cash Flow→ Indicates how much the market values the company's free cash flow production.Which cash flow ratio do you use the most?For me, it's the Free Cash Flow Yield.***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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𝗧𝗵𝗲 𝗣𝗲𝗿𝗶𝗼𝗱𝗶𝗰 𝗧𝗮𝗯𝗹𝗲 𝗼𝗳 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗠𝗲𝘁𝗿𝗶𝗰𝘀Post credit by: Josh Aharonoff, CPA Go and follow him!where Chemistry meets Profitability (and much more)...📣 Help me spread Financial literacy by liking, commenting, and sharing this post!📣1️⃣ OCFOperating Cash FlowNet Income + Other Non-Cash Items - Changes in Working Capital2️⃣ FCFFree Cash FlowOperating Cash Flow - Capital Expenditures3️⃣ CCCCash Conversion Cycle Days of Inventory Outstanding + Days of Sales Outstanding - Days of Payables Outstanding4️⃣ NCFNet Cash FlowOperating Cash Flow + Investing Cash Flow + Financing Cash Flow5️⃣ DCFDiscounted Cash FlowCF1 / (1+r)1 + CF2 / (1+r)2 + ... + CFn / (1+r)n, where CF is cash flow, r is the discount rate, and n is the number of periods.6️⃣ PVPresent ValueCF / (1+r)^t, where CF is cash flow, r is the discount rate, and t is the number of periods.7️⃣ FVFuture ValueCF x (1+r)^t, where CF is cash flow, r is the interest rate, and t is the number of periods.8️⃣ PPPayback PeriodInitial Investment / Annual Cash Flow9️⃣CRCash Ratio(Cash + Marketable Securities) / Current Liabilities🔟 CBCash BurnCash from Operating Activities + Cash from Investing Activities1️⃣1️⃣ UFCFUnlevered Free Cash Flow:EBIT x (1 - Tax Rate) + Depr & Amort - CapEx - Incr in Net Working Capital1️⃣2️⃣ LFCFLevered Free Cash Flow:EBITDA - Taxes - Capital Expenditures - Changes in Net Working Capital - Interest Expense1️⃣3️⃣ GPGross Profit Total Revenue - Cost of Goods Sold (COGS)1️⃣4️⃣ EBITDAEarnings Before Interest Taxes Depr and AmortNet Income + Int Expense - Int Income + Taxes + Depr + Amort1️⃣5️⃣ EBITDA (M)EBITDA MarginEBITDA / Revenue1️⃣6️⃣ OINet Operating incomeGross Profit - Operating Expenses1️⃣7️⃣ NINet Income Total Revenue - Total Expenses1️⃣8️⃣ NIMNet Income Margin Net Profit / Revenue1️⃣9️⃣ GPMGross Profit Margin Gross Profit / Revenue2️⃣0️⃣ ROIReturn on Investment Net Profit / Total Investment2️⃣1️⃣ ROEReturn on EquityNet Profit / Shareholders Equity2️⃣2️⃣ ROAReturn on AssetsNet Profit / Total Assets2️⃣3️⃣ NOINet Other IncomeOther Income - Other Expense2️⃣4️⃣ EPSEarnings per Share (EPS) Net Profit / Total Shares Outstanding2️⃣5️⃣ OMOperating MarginOperating Income / Revenue2️⃣6️⃣ PEPrice-to-EarningsPrice per Share / EPS2️⃣7️⃣ ROCEReturn on Capital EmployedOperating Profit / Capital Employed…and many more!Follow Long Term Mindset for more content like this.***P.S. 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 you found this post useful, please repost ♻️ to share with your audience

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The Investing Risk PyramidThe classic definition of risk is measured in volatility, which is how much and how quickly the value of an investment can change.According to this definition of risk, here's how various assets stack up:HIGHER RISK- Futures- Options- Unprofitable stocks- Junk bonds- Commodities- Crypto- Precious MetalsMEDIUM RISK- Growth stocks- Small company stocks- Medium-rated bonds- Mutual funds- Rental real estateLOW RISK- Blue chip stocks- Investment grade bonds- US Treasury bonds and notesLOWEST RISK- Savings accounts- Money market funds- CDs- US Treasury bills Fixed annuitiesWith that said, here are two quote about risk that everyone should keep in mind."Risk comes from not knowing what you're doing." -- Warren Buffett"The biggest, least mentioned risk of all -- is not taking enough risk." -- David GardnerDo you think volatility is a good measure of risk?***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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The Financial Due Diligence ChecklistValuable post from Nevena Miskovic Follow her!All important FDD checks and insights are in one place.Hope this can help you improve your knowledge of FDD.🚀 𝗛𝗲𝗹𝗽 𝗺𝗲 𝘀𝗵𝗮𝗿𝗲 𝘁𝗵𝗲𝘀𝗲 𝗲𝘀𝘀𝗲𝗻𝘁𝗶𝗮𝗹 𝗰𝗵𝗲𝗰𝗸𝘀 𝘄𝗶𝘁𝗵 𝘁𝗵𝗶𝘀 𝗙𝗥𝗘𝗘 𝗖𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁.𝗗𝗼 𝘆𝗼𝘂 𝗹𝗶𝗸𝗲 𝘁𝗵𝗲 𝗱𝗼𝘄𝗻𝗹𝗼𝗮𝗱𝗮𝗯𝗹𝗲 𝗣𝗗𝗙 𝘃𝗲𝗿𝘀𝗶𝗼𝗻? 𝗗𝗠 𝗺𝗲 𝗼𝗿 𝗰𝗼𝗺𝗺𝗲𝗻𝘁.𝗛𝗲𝗿𝗲 𝗶𝘀 𝘄𝗵𝗮𝘁 𝘁𝗵𝗲 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗗𝘂𝗲 𝗗𝗶𝗹𝗶𝗴𝗲𝗻𝗰𝗲 𝗖𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁 𝗜𝗻𝗰𝗹𝘂𝗱𝗲𝘀:▶️ General checks▶️ Analytical procedures▶️ Internal controls check▶️ Property, plant, equipment, and intellectual property checks▶️ Inventories check▶️ Account receivables check▶️ Revenues check▶️ Loans and interest expenses check▶️ Account payables check▶️ Commitments and contingencies check▶️ Salaries, employee costs check▶️ OPEX check▶️ Equity check▶️ Loans and financial liabilities check▶️ Intercompany transactions checkFollow Long Term Mindset for more content like this.***P.S. 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 you found this post useful, please repost ♻️ to share with your audience

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Assets Explained Simply:Assets are any resource owned by a company that can be used to produce economic value.Assets are ordered by LIQUIDITY, which is the speed at which they can be converted into cash.There are two main categories of assets:• CURRENT ASSETS: are expected to be used within one year.• LONG-TERM ASSETS: have a useful life of more than 1 year.Management teams have complete control over the categories that they use, but here are some of the more popular ways that assets are categories:CURRENT ASSETS 💴CASH & CASH EQUIVALENTSWhat: Cash / T-bills / CDs <3 Month MaturityKind of Like: Your Checking AccountingMARKETABLE SECURITIESWhat: Liquid Equity / Bonds Expected To Be Used In <1 YearKind of Like: CDs that mature in <1 yearACCOUNTS RECEIVABLE:What: Money That Is Owed By CustomersKind of Like: You paid for a friend's dinner, and they owe you moneyINVENTORY:What: Raw Materials & Finished Goods Available For SaleKind of Like: Unsold items in a personal Etsy storeOTHER CURRENT ASSETS:What: A Catch-All Category Of Assets Expected To Last <1 YearKind of Like: Homeowners insurance, car insurance, health insuranceLONG-TERM ASSETS 💴LONG-TERM INVESTMENTSWhat: Investments The Company Intends To Hold For >1 YearKind of Like: Your Retirement FundFIXED ASSETS:What: Land / Machinery / Equipment / Buildings / Durable AssetsKind of Like: Your house or carGOODWILL:What: Premiums Paid To Acquire Other BusinessesKind of Like: Your reputationOTHER LONG-TERM ASSETS:What: Catch-All Category Of Assets Expected to Last >1 YearKind of Like: A diploma or advanced DegreeWhat other common categories of assets do you see?***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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The CFOs Guide to Managing the Finance Function on ONE page!Incredible post by Anders Liu-Lindberg, follow him!Like, comment, and share to help spread the word about this FREE resource!If you want the PDF in high-quality resolution then let us know 👇Help CFOs and senior finance leaders get a better grip on how to drive forward their finance function successfully.Help young and up-and-coming finance and accounting professionals get a great understanding of all the parts of the finance function.In this guide, we cover the following...✅ The ten main responsibilities of a CFO✅ The ten areas to excel with each responsibility✅ The ten KPIs to measure the success of each area✅ 8 types of CFO a company may need✅ The new mindset of a modern CFO✅ The difference between a CEO and CFONever has so much knowledge for CFOs been shared on one page!And if in doubt here are ten main responsibilities...1️⃣ Financial planning and analysis2️⃣ Financial reporting3️⃣ Risk management4️⃣ Cash management5️⃣ Capital management6️⃣ Tax management7️⃣ Investor relations8️⃣ Corporate governance9️⃣ Strategic planning🔟 Leadership and managementWhat would you add to this CFOs Guide to Managing the Finance Function?Any areas you think we've missed?Or anything you need to be added to excel in each of the areas?Finally, do you feel any critical KPIs have been left out?Let's help CFOs take better charge of the finance function!Follow Long Term Mindset for more content like this.***P.S. 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 you found this post useful, please repost ♻️ to share with your audience

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