BC ACCOUNTING
Saved by @AnmolNarula11

Accounting is the language of business.

If you buy stocks, you MUST learn how to read a Cash Flow Statement.

Here’s everything you need to know:

 The cash flow statement shows how cash moves in and out of a company over a period of time.

The most common time periods are:
▪️1 Quarter
▪️1 Year
▪️Year-to-date (usually 6 or 9 months)

The time period is at the top. Here's $NFLX recent cash flow statement time period.
Some companies show the cash flow statement in their earnings press release, but many don’t.

You can find the cash flow statement by looking at:
▪️10-Q (Quarterly Report)
▪️10-K (Annual Report)
▪️Fnancial aggregators such as @theTIKR,
@CMLviz, @themotleyfool, @YahooFinance
There are three main segments to a cash flow statement.

1. Operating Activities
2. Investing Activities
3. Financing Activities

Companies get some leeway with how they breakout each segment, but they all follow this basic structure.
Let’s start with Operating Activities.

This segment STARTS with net income (the bottom number of the Income Statement).

It shows cash movements from all normal operational business activities.
Non-cash expenses are ADDED back as a source of cash.

Common categories:
▪️Depreciation: Value of asset decreasing over time 
▪️Amortization: Expensing a pre-paid cost over time
▪️Stock-Based Comp: Paying employees with equity
Next is Working Capital, which can ADD or SUBTRACT from cash flow:

Categories:
▪️Accounts Receivable: Sales that haven't been collected yet
▪️Accounts Payable: Bills that haven't been paid yet
▪️Inventory: Value of product you haven’t sold yet
Once all cash adjustments are made, the net is a company’s Operating Cash Flow.

Think of this number like a company’s Net Income, but in actual cash.
The next section is called Cash Flows from Investing Activities.

The shows the cash gains and losses from investments the business has made.
Categories:
▪️Capital Expenditure (CAPEX): Money spent to acquire/maintain physical assets such as property, plants, buildings, or equipment.
▪️Acquisitions: buying another company
▪️Proceeds from sale of investments: Cash recieved from selling CAPEX or acquisitions
We can now calculate Free Cash Flow (FCF)!

FCF is the cash that is left after a company has paid for its Operating Expenses and CAPEX.

Many investors (myself included) consider this to be a superior way to calculate a company’s actual profitability.
Section 3 is Cash Flows From Financing Activities.

This measures the cash movements between a company and its owners (shareholders) and its creditors (bondholders).
Common categories:

▪️Debt: Cash gained/lost from borrowing/repaying debt
▪️Stock: Cash gained/lost from issuing/repurchasing stock
▪️Dividends: Cash payments to shareholders
The final section shows the total changes in cash balance during the period.

Its shows:
1⃣Sum of Operating Activities + Investing Activities + Financing Activities
2⃣Starting Cash Balance
3⃣Ending Cash Balance
The cash flow statement is complex.

Watching an example is VERY helpful

@brian_stoffel_ and I made a YouTube video about the cash flow statement that uses $NFLX as an example

Watch it here: https://t.co/VdpwQq7SYu
Enjoy this thread?

Follow me @BrianFeroldi

I regularly tweet about money, investing, and personal growth
Want to learn how to invest?

Subscribe to my YouTube channel.

We teach investors how to research stocks & the most important investing lessons we've ever learned.

https://t.co/lWwcb1JdD1
If this thread was helpful, you’ll also enjoy my thread on how to read an income statement

https://t.co/75PRb0EenB
Finally, here’s my thread on how to read a balance sheet

Happy investing!

https://t.co/Fdqn8qPkXr

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Brian Feroldi
Brian Feroldi
@BrianFeroldi
1/ My Mission: To Spread Financial Wellness (thread)

Here’s what "financial wellness" means to me

⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️

2/ Mindset

Humans are programmed to think short-term

Evolutionary, thinking short-term makes sense. It helps with survival.

Financial wellness is all about training yourself to develop a long-term mindset

Not easy -- it takes practice


3/ Mindset

If you join the right tribes, you can’t help but improve

My favs:
@AffordAnything
@ChooseFiFI
FinTwit
@MicroCapClub
@themotleyfoolFool
@visualizevalue

Twitter / Podcasts / Blogs / YouTube -- when used correctly -- are amazing


4/ Mindset

Educate yourself - constantly!

Especially about:

1⃣Money
2⃣Relationships
3⃣Health

These 3 categories have an outsized influence on all areas of your life

Books


5/ Career

In the beginning, focus on growing your income

Do more than what is expected

Become a lynchpin

Find a career that you ENJOY (<- important!) that also has high-income potential

Start a side hustle (<- important!)

Build your talent
FINANCE
Brian Feroldi
Brian Feroldi
@BrianFeroldi
1/ Mission Statements 🧵

I used to think mission statements were just corporate fluff

False words that companies created for HR reasons

I've slowly changed my mind about them

They are THE BEST stakeholder alignment & decision-making tool ever

EVER!

Need convincing? ⬇️⬇️⬇️⬇️

2/ What is a mission statement?

At its core, a mission statement should answer this question:

*****Why does the company exist?*****

A profound question that is easy to overlook!

3/ When used properly

Mission Statements should guide ALL of the actions of the organization

It's like a company's North Star

If an activity doesn’t advance the mission,

it should be discarded!

If an activity does advance the mission,

it should be adopted!

4/ A Mission and a Vision statement are different

Mission: WHY the company exists

Vision: What the company/world looks like if the company is successful

Both important, but they are NOT interchangeable

5/ The reason I used to think mission statements didn't matter

is because the vast majority of companies/CEOs

don't believe they matter!

Most companies SUCK at creating & communicating them!

Why should employees/shareholders care about a mission

if the company/CEO doesn't?
FINANCE
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Brian Feroldi
@BrianFeroldi
My inflation strategy:

Own businesses with recession-proof demand and pricing power
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Brian Feroldi
Brian Feroldi
@BrianFeroldi
Accounting is the language of business.

If you buy stocks, you MUST learn how to read a balance sheet.

Here’s everything you need to know:

The balance sheet is one of the 3 major financial statements.

It shows company’s:

▪️Assets: What it owns
▪️Liabilities: What it owes
▪️Shareholders Equity: It's net worth attributable to its owners

At a fixed point in time

That “at a point in time” part is key!

A balance sheet is a SNAPSHOT of a company’s net worth.

It is usually measured at the end of a quarter/year.

That’s different from an income statement or cash flow statement, both of which are measured over periods of time

All balance sheets follow the same formula:

Assets = Liabilities + Shareholders Equity

This formula must be in balance at all times

(Hence the term “balance sheet”)


Side Note:

This formula can be easily re-arranged into the “net worth” formula that you are already familiar with

Assets - Liabilities = Shareholders Equity (Net worth)
BALANCESHEET
Brian Feroldi (\U0001f9e0,\U0001f4c8)
Brian Feroldi (🧠,📈)...
@BrianFeroldi
How to analyze a:

▪️Balance Sheet
▪️Income Statement
▪️Cash Flow Statement

In less than 5 minutes:


Every company has 3 financial statements.

Each answers a unique question:

1. Balance Sheet: What’s your net worth?

2. Income Statement: Are you profitable?

3. Cash Flow Statement: Are you generating cash?


The financial statements are interrelated.

Each views a company’s financials from a different angle.

When combined, they provide a more complete view of a company’s true financial position.


1A: Balance Sheet

This tells you a company’s net worth at a specific point in time.

Layout:


1B: What I focus on first:

1⃣ Cash & Equivalents: How much?
2⃣ Debt: How much vs. cash?
3⃣ Goodwill: How much?
4⃣ Retained Earnings (+ T.S.): Positive?
5⃣ Receivables & Inventory: How much?
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Thread Threadexplaining #PE Ratio & #PEG Ratio & its use in #FundamentalAnalysis

(Must read for #FA learners)

🙏Like & RT to spread learning with all🙏

Views Welcome👉@dmuthuk @Vivek_Investor @datta_arvind @caniravkaria @FI_InvestIndia

#FundamentalAnalysis #StockMarket


1⃣

Price to Earnings (#PE) ratio, also known as price multiple or earnings multiple is the ratio obtained by dividing the current share price by earnings per share (#EPS).

#StockMarket #Investing #FundamentalAnalysis


2⃣

P/E ratio is a reflection of the market's opinion of the earnings capacity & future business prospects of a company.

Companies which enjoy high investor confidence & have a higher market standing usually command high P/E ratio.

#StockMarket #Investing #FundamentalAnalysis

3⃣

On the face, it would seem that companies with low P/E ratios would offer most attractive investment opportunities. This is not always true.

Companies with high current earnings but dim future prospects often have low P/E ratio.

#StockMarket #Investing #FundamentalAnalysis

4⃣

As an #investor your primary concern is with future prospects of a company & not so much with its present performance.

This is why companies with low current earnings but bright future prospects usually command high P/E ratio.

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The Disciplined Investor
The Disciplined Invest...
@Disciplined_Inv
One of the best debates I have seen in recent history between @SunilBSinghania and Saurabh Mukherjea.

TOPIC: Has P/E lost its relevance?

I resonate more with Sunil’s side. Here’s a thread 🧵 on the main points made by him:

@varinder_bansal @safiranand @myvaluepicks

1/ Importance of PE

PE is not the only factor but an important factor.

Ultimately the growth has to justify how much PE are you paying for the company.

There cannot be an unlimited PE multiple based on some xyz parameters.

2/ Hindsight Bias:

In hindsight we can say that from 2001 to 2021, a company grew at 25 % and we should have given a very high PE to it.

But on the day when you buy, you don’t know that the company is going to grow at 25% for the next 20 years.

3/ Millennial preference:

Things have become more competitive.

New generation don’t really care much about legacy.

Convenience and affordability matters more.

The longevity and sustainability of growth has changed dramatically.

4/ Company that require a big investment - There is opportunity to invest big.

Company 1: Mkt Cap of 50 cr
Company 2: Mkt cap of 1 lakh cr

50c r company can become 3x, 1 lakh cr company cannot become 2x.

On absolute basis you end up making 5 cr vs 5k cr in 1lakh cr company.
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@peterdevietien
@10kdiver Ah thank you. Yeah so strange! Maybe Twitter just hates me.
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@The_Plain_Bagel
I see a lot of YouTubers treating stock-based compensation as a "non-cash" item they can disregard, but it's essentially a company paying its employees with shareholder money; if they used money from selling shares to cover salaries, you'd see just how real of an expense it is
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Accounting is the language of business.

10 threads that will teach you more about accounting than any accounting degree:

1/ Who: @10kdiver

What: Understand the balance


2/ Who: @SoulFairy3

What: Income statement


3/ Who: @BrianFeroldi

What: Income statement


4/ Who: @AliTheCFO

What: Profit vs cash
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Bahcesehir Uni, BAU has an official website https://t.co/ztzX6uj34V which links to their social media, leading to their Twitter account @Bahcesehir

BAU’s official Twitter account


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You want to know something about how bullshit insane our brains are?
OK, so there's a physical problem with our eyes: We move them in short fast bursts called "saccades", right? very quick, synchronized movements.
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