What are the categories of the Operating Activities on Statement of Cash Flow
- Depreciation +
- Loss + (or Gain -) on Disposal of Equipment
- Accounts Receivable -
- Inventory -
- Prepaid Expenses -
- Accounts Payable +
- Income Tax Payable +
- Other liabilities +
What are the categories of the Investing Activities on Statement of Cash Flow
- Long Term Investments +
- Purchase of Equipment -
- Purchase of Furniture -
What are the categories of the Financing Activities on Statement of Cash Flow
- Payment to Bank Loans -
- Common Shares Issued +
- Dividends -
Vertical Analysis
- (Analysis) / Base Amount = Vertical Percentage
- So total sales is 100% and a single sale is percentage of that.
- Applies to total assets and liabilities
Working Capital
Current Assets - Current Liabilities
Higher is better
Make sure to check notes for relevant information
Current Ratio
Current Assets / Current Liabilities
Higher is better, but too high suggests frozen or stagnant cash
Expressed as a ratio
319,000 / 185,000 = 1.72 : 1
Receivables Turnover
Net Credit Sale / Average Gross Receivables
Measures how often the company collects the receivables
Higher is better
Look for an allowance for doubtful accounts and add if necessary
900,000 x 75% / (95,000 + 5,000) + (90,000 + 4,000)/2
675,000 / 97,000 = 6.958 days
Average Collection
365 / Receivables Turnover
Lower is better (because you want quick receivable turnover)
Inventory Turnover
Cost of Goods Sold / Average Inventory
Higher is better
Debt To Total Assets
Total Liabilities / Total Assets
Lower is better
Times Interest Earned
Interest Before Taxes / Interest Expense
(Net income + Interest Expense + Income Tax Expense Interest Before Taxes) / Interest Expense
Ability to meet interest payments as they come due
Free Cash Flow
Net Cash Provided By Operating Activities - Net Capital Expenditures - Dividends Paid
Asset Turnover
Net Sales / Average Total Assets
Higher is better
Price Earnings Ratio
Market Price Per Share / Basic Earnings Per Share
Higher numbers indicate an expectation of investors of profitability
Payout Ratio
Cash Dividends Declared / Net Income
Higher is better for investors seeking dividend income
Benchmarking
If your are a public company, you must compare with the industry