Net Profit vs Cash Flow from operations (CFO) - What is more important?
A short thread with examples
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1. Net profit is recorded on an accrual basis whereas CFO deals with only cash items. Income earned is recorded in the net profit even if cash is not received
2. Since the net profit is recorded on an accrual basis it's a bit easy to manipulate net profit as compared to CFO.
Case 1: AMI Organics
If we check in the case of AMI organics, in FY22 its CFO was negative even though net profit was positive. It was because its changes in working capital were greater than net profit in FY22.
Similarly if we check in the case of Healthcare Global (HCG), its CFO has always been greater than its net profit. This is because HCG is a speciality hospital chain and in hospitals the depreciation costs are so high that the company looks loss making
1. Suppose if a company is outsourcing its manufacturing vs a company is manufacturing the products in-house. The company which is outsourcing has no plant and equipment so it will record high net profit since its depreciation costs
2. Also in some industries such as hospitals, the depreciation costs are so high that the company looks loss making but if
3. So rather than only looking at the net profit it is very important to check how much cash the company is generating through its core operations.
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Part 1 : Introduction to pharma industry
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Part 2: Drug discovery process with CRAMS, CDMO, CMO, CSM
Link : https://t.co/MPQm0OXUbL
Part 3 : Generic Drugs (ANDA)
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Part 4: Bio-similars
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More from Accounting
It's simple, if ""FY23 PAT of this API to CDMO = FY21 PAT of largest pure-play CDMO/API"" then the FY23 Mcap of this API/CDMO= FY21 Mcap of largest pure-play CDMO/API, am I correct Sajal saab??
— richman (@greatrichman3) June 14, 2021
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Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
I'm increasingly interested in the idea of "personal moats" in the context of careers.
— Erik Torenberg (@eriktorenberg) November 22, 2018
Moats should be:
- Hard to learn and hard to do (but perhaps easier for you)
- Skills that are rare and valuable
- Legible
- Compounding over time
- Unique to your own talents & interests https://t.co/bB3k1YcH5b
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
People talk about \u201cpassive income\u201d a lot but not about \u201cpassive social capital\u201d or \u201cpassive networking\u201d or \u201cpassive knowledge gaining\u201d but that\u2019s what you can architect if you have a thing and it grows over time without intensive constant effort to sustain it
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3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
Things that look like moats but likely aren\u2019t or may fade:
— Erik Torenberg (@eriktorenberg) November 22, 2018
- Proprietary networks
- Being something other than one of the best at any tournament style-game
- Many "awards"
- Twitter followers or general reach without "respect"
- Anything that depends on information asymmetry https://t.co/abjxesVIh9
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.