Statewide, jobs grew from approximately 936,000 openings listed across the Internet in January 2013 to over 972,500 open job postings in August of the same year. Like the internet environment, the financial world is exciting and dynamic – I think that’s why there’s growing interest in online trading worldwide. The Organization of Oil Exporting Countries (OPEC) is facing the toughest test of its existence, with many analysts of the opinion that we are witnessing OPEC’s last hurrah. Before you begin to feel that financial analysis might contain a lot of mathematics and difficult calculations, I want to tell you that the entire financial analysis consists of study of only two things: Ratios and Growth rates.
As we delve deeper into financial analysis, we would see that it entails reading the annual reports, noting down some relevant numbers from it and study various ratios of these numbers and their growth rates over the years. However, if any investor is not verse with using data analysis software like excel, he can use the calculators to find out the ratios and growth rates. Operating profit does not factor in expenses like depreciation of fixed assets, interest and tax expenses.
Hence, we would revisit tax payouts while discussing management analysis in future parts of this series. Therefore, the more investors you interact and the more authors you read, you would find that everyone has her own way of analyzing financial statements. We have not used the ratios/parameters that utilize figures across these three financial statements.
This section provides details of the cash that a company has generated in last financial year from operation (cash flow from operations or CFO). This section also includes details of cash used in making investments or received from selling investments (cash-flow from investing activities or CFI) and cash raised from financial institutions as borrowings or repaid to them during the last year (cash-flow from financing activities or CFF).
Comparative analysis of B/S, P&L and CF is necessary, as it will provide a sanctity check on the numbers reported by any company. It will also provide further insights into the financial position and operating efficiency of the company. However, one analysis that compares P&L with the CF is mandatory for each investor to perform on every company she is studying. In future articles on the series Top Stocks to Buy”, I would discuss remaining sections of detailed analysis of a company: Management, Business & Industry and Valuation analysis.