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What's stopping you from becoming a successful investor?
I'll tell you what...
It's your lack of ability to read and comprehend financial statements
I'll show you how to fix that in
"Grow Rich With a Statement"
- A THREAD -
I'll tell you what...
It's your lack of ability to read and comprehend financial statements
I'll show you how to fix that in
"Grow Rich With a Statement"
- A THREAD -
Why do people shy away and neglect financial statements?
Because they're boring as hell
I'm not going to bullsh*t you
They suck to read
If you love doing it, you're so many steps ahead of everyone else
So congratulations to you!
Because they're boring as hell
I'm not going to bullsh*t you
They suck to read
If you love doing it, you're so many steps ahead of everyone else
So congratulations to you!
Hopefully, this thread doesn't remind you too much of your accounting days in college
Although I do believe that everyone should take at least one basic accounting class in their lifetime
Financial statements are jam-packed with information
A lot of it is important...
Although I do believe that everyone should take at least one basic accounting class in their lifetime
Financial statements are jam-packed with information
A lot of it is important...
Some of it isn't
I'm going to show you what to focus on so you can trim the fat
Ready?
Let's do this!
I'm going to show you what to focus on so you can trim the fat
Ready?
Let's do this!
There are 4 types of financial statements
1) Balance sheet
2) Income statement
3) Cash flows statement
4) Statement of owners equity
Today we're going to be focusing on #3 - the Cash Flows Statement
The others will be for another day...
1) Balance sheet
2) Income statement
3) Cash flows statement
4) Statement of owners equity
Today we're going to be focusing on #3 - the Cash Flows Statement
The others will be for another day...
Why am I focusing on the Cash Flows Statement?
Because although the other's are important, I believe at a glance it gives you the best overview of a company and the efficiency of operations
No wonder it's the first Pillar of my course...
So what is the Cash Flows Statement?
Because although the other's are important, I believe at a glance it gives you the best overview of a company and the efficiency of operations
No wonder it's the first Pillar of my course...
So what is the Cash Flows Statement?
The Cash Flows Statement measures how effectively a company manages its own cash position
This means it tells you how well they are able to generate cash flows in order to pay off debt obligations
This means it tells you how well they are able to generate cash flows in order to pay off debt obligations
It also gives you an idea of how they fund any operating expenses like:
- Payroll
- Rent
- Repairs
- Taxes
In simpler terms, the Cash Flows Statement tells you where the company’s money is coming from and how it’s being spent
- Payroll
- Rent
- Repairs
- Taxes
In simpler terms, the Cash Flows Statement tells you where the company’s money is coming from and how it’s being spent
With COVID among us...
I'm sure you've seen some companies have troubles with their cash positions
This is the result of not having enough cash on hand to run operations, pay labor expenses and ultimately keep their business afloat
I'm sure you've seen some companies have troubles with their cash positions
This is the result of not having enough cash on hand to run operations, pay labor expenses and ultimately keep their business afloat
You can use Cash Flows Statement analysis to determine the financial strength of the company
And in my opinion, it should be one of the first steps of your analysis
There are 3 different parts of the Cash Flows Statement...
Let's take a look at what they are:
And in my opinion, it should be one of the first steps of your analysis
There are 3 different parts of the Cash Flows Statement...
Let's take a look at what they are:
1) Cash Flow From Operations (CFO)
By far the most important indicator of the efficiency of cash generation
It reflects the cash that the company generates internally and represents the companies operating profit
By far the most important indicator of the efficiency of cash generation
It reflects the cash that the company generates internally and represents the companies operating profit
If you see a negative number in this portion of the Cash Flows Statement...
Run in the opposite direction
It means their business operations are losing money
We don't want that as an investor
Run in the opposite direction
It means their business operations are losing money
We don't want that as an investor
2) Cash Flow From Investing (CFI)
This amount includes anything that involves the purchase or sale of long-term assets such as property, plant and equipment
It includes money that has been spent to:
- Grow
- Maintain assets
- Acquire other companies
- Invest in the market
This amount includes anything that involves the purchase or sale of long-term assets such as property, plant and equipment
It includes money that has been spent to:
- Grow
- Maintain assets
- Acquire other companies
- Invest in the market
A negative number is NOT a red flag
Sometimes this just means that the company is investing a significant amount of cash towards long term investments
This could be a good sign of potential future growth, so be aware of negative numbers in this portion of the statement
Sometimes this just means that the company is investing a significant amount of cash towards long term investments
This could be a good sign of potential future growth, so be aware of negative numbers in this portion of the statement
3) Cash Flow From Financing (CFF)
This is where you will find the amount of money the company has raised through share or bond issuances, as well as other forms of debt
If the company took out a loan, you would see it in this portion of the statement as a positive number
This is where you will find the amount of money the company has raised through share or bond issuances, as well as other forms of debt
If the company took out a loan, you would see it in this portion of the statement as a positive number
Positive cash flow from financing means that the business is raising money, which is good for us as investors
A negative number means that the business is paying money out either in the form of share buybacks and dividends...
Or maybe in the form of interest and debt payments
A negative number means that the business is paying money out either in the form of share buybacks and dividends...
Or maybe in the form of interest and debt payments
Financial statements may be boring, but it's important to go through them
This small difference will separate a GOOD investor from a GREAT one
As I've said before...
Ratios will give you the clues
Financials will give you the answers
Don't neglect your statements!
This small difference will separate a GOOD investor from a GREAT one
As I've said before...
Ratios will give you the clues
Financials will give you the answers
Don't neglect your statements!
Want to learn more about how to analyze a company?
Check out The Complete Investors Accelerator Pack
I go much more in-depth about what makes a great business & how to identify it with one quick glance
It may be boring but it will make you wealthy https://bit.ly/dividendmoney
Check out The Complete Investors Accelerator Pack
I go much more in-depth about what makes a great business & how to identify it with one quick glance
It may be boring but it will make you wealthy https://bit.ly/dividendmoney
