Fundamental

Analyzing the Cash Flow Statement

The Cash Flow Statement (CFS) or “statement of cash flows” is a financial statement that records the cash and cash equivalents entering and leaving a company. The “cash inflow” is the money coming into the business, while the “cash outflow” is the money going out. Cash is the lifeblood of any business since, [...]

Measuring a Company’s Cash Conversion Cycle

The cash conversion cycle (CCC) is a measure of the time it takes a company to convert its resources to cash. The CCC is the total time it takes for the company to convert its resources into inventories, then into finished products for sale, then the conversion of those products into accounts receivable and then [...]

The Importance of Operating Cash Flow

Operating Cash Flow or “cash flow from operating activities” is the cash a company generates through the operations of its business. The operating cash flow is generally defined as revenues minus the costs associated with the company’s operations. Because operating cash flow adjusts for liabilities, depreciation, and receivables, it is viewed as a [...]

A Process to Conduct Fundamental Analysis

Fundamental analysis is a stock valuation process under which the investor examines company financials and operations. Under this process, the investor will pay particular attention to the company’s sales and, earnings (as well as growth potential), the company’s assets and liabilities, its management team, product line and competitors. Unlike technical investors, the fundamental investor [...]

Signs that a Company May Be
Headed for Financial Trouble

As we know, there are inherent risks in investing in the stock market. The risks associated with stock market investing exist due to the simple laws of supply and demand. If you purchase a stock whose perceived value then decreases due to investor concerns over the long-term viability of that company, that stock [...]

The Current Ratio in Fundamental Analysis

The Current Ratio is one of the standard measures of the financial health of a business. The measure can provide an indication of whether the business will be able to meet its short-term obligations by measuring the level of current assets to cover those liabilities. In other words the current ratio can tell an [...]

Financial Ratios and Fundamental Analysis

Financial ratio analysis is one of the most important aspects of the fundamental analysis process. Through ratio analysis, an investor can systematically sort through and make sense of the volumes of financial statement data offered by a company. By analyzing and monitoring a company’s financial ratios, an investor can gain insight into the financial [...]

Predicting the Future Earnings of a Company

The value of a stock is driven by the assets the company currently owns and, more importantly, the future earnings of the company. For this reason, accurately projecting future earnings, and discounting those earnings appropriately to today’s dollars, is critical in arriving at the true or “intrinsic” value of a stock.

Looking at Past Earnings [...]

Basic Stock Valuation Methods

Stock valuation is a process undertaken by stock investors to arrive at the real or “intrinsic” value of a share based on data collected from the company’s financial statements. While there are a number of different approaches for this, they all revolve around assigning a value to the stock today based on the future [...]

The Importance of the Company Balance Sheet
to Investors

The company Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. The balance sheet is one of the three important financial statements for a company (the Income Statement and the Cash Flow Statement being the other two). In analyzing the balance sheet, investors [...]