Long Term Mindset on LinkedIn: How to analyze a Cash Flow Statement in < 2 minutes: Ask these questions:… | 10 comments (2024)

How to analyze a Cash Flow Statement in < 2 minutes:Ask these questions:→Did the company generate positive Net Income?→Does the company have high depreciation expense?→What are the biggest non-cash charges?→Is stock-based compensation high or low?→How do changes in working capital affect cash flow?→Are capital expenditures high or low?→Does the company generate positive free cash flow?→Do net income and free cash flow closely match each other? If not, why?→What is the company doing with its operating income?→How is the company using debt?→Is the company issuing stock or repurchasing it?→Does the company pay a dividend?→Is the cash balance rising or falling? Why?What questions did I miss? Let me know below!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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Financial Statements Green FlagsINCOME STATEMENT 📜→Accelerating Revenue Growth→Gross Margin Expansion→Operating Expenses Growing Slower Than Revenue→Operating Margin Expansion→Interest Income Exceeds Interest Expense→Pre-Tax Margin Expansion→Income Tax Rate Near 21%→Net Income Grows Faster Than Revenue→Shares Outstanding Declines→Earnings Per Share Consistently GrowsBALANCE SHEET 📜→More Cash Than Debt→No Accounts Receivables→No Inventory→Goodwill Less Than 10% of Total Assets→Current Liabilities Less Than Cash→No Short-Term or Long Term Debt→Deferred Revenue→No Preferred Stock→Retained Earnings Positive & Growing→Treasury StockCASH FLOW STATEMENT 📜→Net Income Positive & Growing→Stock-Based Compensation Less Than 10% of Net Income→Operating Cash Flow Higher Than Net Income→Capital Expenditures Less Than 10% of Net Income→Free Cash Flow Higher Than Net Income→Stock Repurchase→Dividends Paid→Cash Balance IncreaseWhat "green flags" do you look for in financial statements? Let me know below!***➕ 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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Are you tired of feeling lost in a sea of financial jargon? Do terms like ROI, EBITDA, or balance sheet make your head spin?Let’s break down some common financial terms and prove that you don’t need a degree in accounting to speak the language of finance!1️⃣ Return on Investment (ROI) 📈 ROI is a measure of the profitability of an investment, and can help determine the success of an investment in a language we all understand…percentages! THE FORMULA: [final value] - [initial investment amount] ÷ [initial investment amount] x 100. 2️⃣ Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) 💰EBITDA is a way to measure a company's operating performance WITHOUT factoring in financing costs, taxes, or non-cash expenses like depreciation and amortization. Think of it as a metric that shows how well a company generates profits from its core operations, ignoring other factors. It helps you focus on pure operating performance, which allows easier comparisons across different businesses!3️⃣ Balance Sheet 📊 A balance sheet provides a snapshot of a company's financial position at a specific point in time. It consists of three sections: assets, liabilities, and equity:Assets = what the company OWNSLiabilities = what the company OWESEquity = what’s left for its owners4️⃣ Cash Flow 🌊 Cash flow is the movement of money in and out of a company over a specific period.It shows how much cash is generated from the company's operating activities (think software costs), investing activities (think buying or selling assets), and financing activities (think repaying debt). It's like tracking the company's bank account to see how much money is flowing in or out.5️⃣ Profit Margin 📉 Profit margin is a percentage that shows the profitability of a company's products or services. It shows how much profit a company makes per dollar of revenue generated.FORMULA: [net income] ÷ [total revenue] x 100It's like understanding the slice of profit from the pie of sales!Share your favorite financial jargon in the comments below.Let's empower each other to navigate the financial world with confidence! 👩💼👨💼#FinancialLiteracy #smallbusiness #bookkeeping #Empowerment

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FINANCIAL REPORTING RefresherStatement of Cash Flow Very insightful content to give a quick refresher course on year end financials workings.

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@BojanRadojicic: In a nutshell then, the Statement of Cash Flows is merely Net Income plus Depreciation/Amortization from the Income Statement plus delta changes in the Balance Sheet. And any adjustments like dividends paid. Yes?

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LEARN HOW TO BUILD CASH FLOW STATEMENTS IN A MINUTESFist of all you need reliable data sorted, in a form of trial balance, or balance sheet and income statements. This is indirect method obviously. 𝗦𝗼 𝘁𝗵𝗶𝘀 𝗶𝘀 𝘁𝗵𝗲 𝗽𝗿𝗼𝗰𝗲𝘀𝘀:1. List a balance sheet or assets and liabilities account 2. Include a figures of current and previous period3. List Income statements for last period4. Make sure you have separate lines for non-cash items 5. Create or download simple cashflow template - 6. Input net income from IS7. Input non-cash items for IS8. Input changes in current assets from BS9. Input changes in current liabilities for BS10. Input sales inflows from non-current assets11. Input purchase value of non-current assets12. Input increase of share capital if any13. Input payment of dividends14. Input decrease of increase of financial liabilities --------------Life in finance is busy.Deadlines, tons of spreadsheets, management pressure lead to chronic stress. 📌 My team and I specialize in helping finance professionals avoid chaos and focus on what matters. With us you can achieve peak performance through:→ Actionable content→ Tailored courses→Customizable financial models.𝗗𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝘁𝗵𝗶𝘀 𝗘𝘅𝗰𝗲𝗹 𝗺𝗼𝗱𝗲𝗹: https://lnkd.in/dqUkaiU8See more resources here: 👉 https://bojanfin.com/

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Personal Finance with P.B.O.DPersonal finance with P.B.O.D is a directional financial lifestyle guided and supported by four abstract directors.▪️Has more than 100 users▪️Focuses on Excel/Discipline skillsThe goal of P.B.O.D is to gain personal finance insight and drive financial planning.▪️Empowers young individuals and professionals to automate and optimise their financial lifestyle▪️Enables young individuals to sustain early financial advantageP.B.OD is expected to grow your finances from your current financial worth ₦___ to ₦millions in the span of 10 years.P.B.O.D introduces you to Excel.▪️Collect data▪️Perform simple financial analysis▪️Drive effective and impactful financial decisions Let's get started!

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How to analyze a balance sheet in <2 minutes.Study these 4 ratios:⚖ 1: Quick Ratio❓ Question: Can the company pay its bills?➗ Equation: Cash + Equivalents + AR / Current Liabilities🔢 Guide: Fragile = <1.0Robust = 1 to 1.5Antifragile = <0.7⚖ 2: Current Ratio❓ Question: How well does the company manage its assets?➗ Equation: Current Assets / Current Liabilities🔢 Guide: Fragile = <0.7Robust = 1Antifragile = >2.5⚖ 3: Debt-to-Equity Ratio❓ Question: How much leverage is the company using?➗ Equation: Total Liabilities / Shareholder Equity🔢 Guide: Fragile = >2.0Robust = ~1Antifragile = <0.7⚖ 4: Goodwill-to-Assets Ratio❓ Question: Is the company growing organically?➗ Equation: Goodwill / Total Assets🔢 Guide:Fragile = >50%Robust = 10% - 50%Antifragile = <10%To be clear, this isn't all of the balance sheet analysis that you should do.But, looking at these four ratios can get you 90% of the way there in less than 2 minutes.FollowLong Term Mindsetfor more posts like this.***Want to master the basics of accounting (for free)?Enroll in our free, 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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How to analyze a Cash Flow Statement in <2 minutes:Understand these cash flow formulas.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 structure6 Cash Flow Ratios to watch💳 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 ShareWhich ratio do you think is the most useful? Let me know in the comments below!****📌 P.S. Want help understanding how to analyze a balance sheet?Join me for a FREE webinar on Tuesday, 12/19: 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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