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Cash flow statement or Three great riversToday we're going to start taking apart the third and final report that the company publishes each quarter and year - it's Cash flow statement. Remember, when we studied the balance sheet , we learned that one of the company's assets is cash in accounts. This is a very important asset because if the company doesn't have money in the account, it can't buy raw materials, pay employees' salaries, etc. What, in general, is a "company" in the eyes of an accountant? These are assets that have been purchased on credit or with equity, for the purpose of earning a net income for its shareholders or investing that income in further growth. That is, the source of cash in a company's account may be profits . But why do I say "may be"? The point is that it's possible to have a situation where profits are positive on the income statement, but there is no money physically in the account. To make sense of this, let's remember the workshop I use in all the examples. Suppose our master sold all of his boots on credit. That is, he was promised payment, but later. He ended up with a receivable in assets and, most interestingly, generated revenue. The accountant will calculate the revenue for these sales, despite the fact that the shop hasn't actually received the money yet. Then the accountant will deduct the expenses from the revenue, and the result will be a profit. But there is zero money in the account. So what should our master do? The orders are coming in, but there is nothing to pay for the raw materials. In such circumstances, while the master is waiting for the repayment of debts from customers, he himself borrows from the bank to top up his current account with money. Now let us make his situation more complicated. Let us assume that the money borrowed he still does not have enough, and the bank does not give more. The only thing left is to sell some of his property, that is, some of his assets. Remember, when we took apart the assets of the workshop , the master had shares in an oil company. This is something he could sell without hurting the production process. Then there is enough money in the checking account to produce boots uninterrupted. Of course, this is a wildly exaggerated example, since more often than not, profits are money, after all, and not the virtual records of an accountant. Nevertheless, I gave this example to make it clear that cash in the account and profit are related, but still different concepts. So what does the cash flow statement show? Let's engage our imagination again. Imagine a lake with three rivers flowing into it on the left and three rivers flowing out on the right. That is, on one side the lake feeds on water, and on the other side it gives it away. So the asset called "cash" on the balance sheet is the lake. And the amount of cash is the amount of water in that lake. Let's now name the three rivers that feed our lake. Let's call the first river the operating cash flow . When we receive the money from product sales, the lake is filled with water from the first river. The second river on the left is called the financial cash flow . This is when we receive financing from outside, or, to put it simply, we borrow. Since this is money received into the company's account, it also fills our lake. The third river let's call investment cash flow . This is the flow of money we get from the sale of the company's non-current assets. In the example with the master, these were assets in the form of oil company stock. Their sale led to the replenishment of our notional money lake. So we have a lake of money, which is filled thanks to three flows: operational, financial, and investment. That sounds great, but our lake is not only getting bigger, but it's also getting smaller through the three outgoing flows. I'll tell you about that in my next post. See you soon!
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NSE:HDFCBANKEducation
by Be_Capy
8
A word of caution for Investors, Nifty's downside targetsin.tradingview.com Nifty has been performing poorly since the last three months, even if we leave the index constituents aside, the situation is even more dire in midcap and small cap indexes some of which can be attributed to the Adani stocks. Adani stocks, put pressure on the banking index and banking index constituents especially SBI collapsed due to the grenade explosion orchestrated by Hindenburg's report. Meanwhile Nifty IT, Nifty metals, Nifty AUTO did try to give support to the market, despite these sectors performing there was a broadway midcap sell off conducted in the last 3 months. Recently China opened its borders and said it was ready to shrug off covid(finally!) and open its borders for business. This news set the Chinese markets blazing and were up nearly 40% from their near time lows. Moreover the valuation comfort in the chinese markets which were nearly half as expensive as their Indian counterpart, gave fuel to the FIIs sell off. As Indian markets was the place where FIIs could book their yearly profits and pocket their fat bonus cheques. Now coming to the mother market, US. DOW Jones had been a failure for the 5th time last week to give a weekly close above 34k levels.(link to the explanation below). The inflation numbers had been blazing hot, new mortgage applications at a 25 year low, fed's target rate 4.5-4.75 % already high enough to give US residents a headache and further talks to increase it by 50 bips, phew ! It is now becoming highly probable that there might not be any soft landing now and the fall, consuming many , will be a hard one. Since US would be raising rates further, despite the situation being fine in India, Indian RBI governor will have to raise rates in India to arrest any declines in Rupee vs US dollar, which will ultimately put pressure on Indian equity markets too. Many Indian banks are already offering fixed deposit rates as high as 7-8.5%(and further high if you are a senior citizen). If you look deeper, soverign gilt funds are offering good options too and Indian treasuries are offering yields as high as 7.4%, imagine what the equity markets have to compete with ! Alas, I would like to say, overall macros and micros do not look good for the equity markets across globe. For all the investors/traders who entered the markets post covid, and "BUY on dips", was their holy sentence, my suggestion to hold your horses for the time being , take a step back and assess what the markets are trying to convey. My targets for Nifty over the next 6 months might seem to be disturbing but I have tried to chalk out the scenari that Im able to foresee. Let me know in the comments what do you think about market future.
NSE:NIFTYShort
by TanmayAggarwal
4
What should I look at in the Income statement?The famous value investor, Mohnish Pabrai , said in one of his lectures that when he visited Warren Buffett, he noticed a huge handbook with the financial statements of thousands of public companies. It's a very dull reading, isn't it? Indeed, if you focus on every statement item - you'll waste a lot of time and sooner or later fall asleep. However, if you look at the large volumes of information from the perspective of an intelligent investor, you can find great interest in the process. It is wise to identify for yourself the most important statement items and monitor them in retrospect (from quarter to quarter). In previous posts, we've broken down the major items on the Income statement and the EPS metric: Part 1: The Income statement: the place where profit lives Part 2: My precious-s-s-s EPS Let's now highlight the items that interest me first. These are: - Total revenue The growth of revenue shows that the company is doing a good job of marketing the product, it is in high demand, and the business is increasing its scale. - Gross profit This profit is identical to the concept of margin. Therefore, an increase in gross profit indicates an increase in the margin of the business, i.e. its profitability. - Operating expenses This item is a good demonstration of how the management team is dealing with cost reductions. If operating expenses are relatively low and decreasing while revenue is increasing, that's terrific work by management, and you can give it top marks. - Interest expense Interest on debts should not consume a company's profits, otherwise, it will not work for the shareholders, but for the banks. Therefore, this item should also be closely monitored. - Net income It's simple here. If a company does not make a profit for its shareholders, they will dump its shares*. *Now, of course, you can dispute with me and give the example of, let's say, Tesla shares. There was a time when they were rising, even when the company was making losses. Indeed, Elon Musk's charisma and grand plans did the trick - investors bought the company's stock at any price. You could say that our partner Mr. Market was truly crazy at the time. I'm sure you can find quite a few such examples. All such cases exist because investors believe in future profits and don't see current ones. However, it is important to remember that sooner or later Mr. Market sobers up, the hype around the company goes away, and its losses stay with you. - EPS Diluted You could say it's the money the company earns per common share. So, I'm finishing up a series of posts related to the Income statement. This statement shows how much the company earns and how much it spends over a period (quarter or year). We've also identified the items that you should definitely watch out for in this report. That's all for today. In the next post, we will break down the last of the three financial statements of a public company - the Cash flow statement. Goodbye and see you later!
NSE:NIFTYEducation
by Be_Capy
chainlink analysis on daily time frame with supp & resisBased on the daily timeframe analysis of Chainlink (LINK), we can observe that the cryptocurrency is currently facing multiple resistance levels. These levels are located at 8.170, 9.405, and 9.746, and they may pose significant challenges for buyers as the price could encounter selling pressure and struggle to move past them. On the other hand, there are two key support levels at 6.620 and 5.320, indicating that buyers may step in to push the price higher if it falls to those levels. Traders and investors should keep a close eye on the price action near these levels, as they may provide important insights for making trading decisions. However, it is important to note that technical analysis is only one aspect of the market and should be considered alongside fundamental factors and market sentiment before making any investment decisions.
by nawaab001
PostMortem on BankNifty Today & Analysis of 17 FEB 2023So today's price action confirms the move that we had yesterday was not fake. How many traders & investors would have been trapped on the long side when the 41629 resistance broke out? The prevailing trend was bearish, but when an important resistance gave away, it would have prompted lot of buyers into action. And once they deployed their funds we got the reversal. The dip could even be short term, may be it will negate in the coming week itself - but imagine the amount of money you would have lost over the last 2 days? Today's move in NSE:BANKNIFTY was nothing dramatic, agree that many would call it unexpected. But for analysts who have been following the series of events after the meltdown in Adani stocks - this should have been a not so difficult picking. Open was gap down at 41514 and the first 2 candles were in red - already doing the damage in opening 10mts. This set the trend rolling, we had a single leg of consistent fall of 1.57% ~ 652pts till 13.40.  The selling stopped near the 1st support level of 40868 and we also had a brief pull back of 0.65% ~ 267pts from 13.45 to 15.10.  This pull back ensured that the total fall of NSE:BANKNIFTY was only 1.2% ~ 499pts which is not so bad either. But there are some interesting things that happened The spike in volume of CE options traded, showing intense writing. The volumes spiked just after NSE:BANKNIFTY made the pull back ensuring the option sellers got good premiums too. The drop in options premium on the PE side after 14.50 aiding the view that the dip may not have further deep legs. If today's fall was that dramatic then the PE options should have retained their higher premiums. It can also be true that the premiums could spike on monday or tuesday if we have continuation pattern. And most of you would have seen the % spikes PE premiums hit. --- 15mts TF has negated the small bullish view that it had on 15th. From there we had 1 support break & retest of the 2nd support level. --- 1hr TF may be showing the range widening possibilities in the coming weeks. This could be because the selling came in only when NSE:BANKNIFTY went over the resistance - a common phenomenon associated when sellers are in control.
NSE:BANKNIFTY
by viswaram
Nationalum - looks good this weeknationalum - national aluminium company limited In Monday’s (13-feb-2023) session, the stock formed a bullish engulfing candlestick pattern on the daily chart which is pointing to a bounce against the current downtrend, at least for the time being. A counter-trend rally to 81.15 can be seen in this week, from the 78.90. disclaimer: note this is just for education purpose to analyze the candle stick pattern, rsi and expected next levels as per fibonacci levels. this is not buy or sell call, any trading on this counter will be at your own risk.
NSE:NATIONALUM
by hardeepssethi