28 September 2014

A Short Discussion with Brother on Bloomberg Summary for the Counter - September 2014

I had a short discussion with brother on Bloomberg mobile app today morning, as he was quite interested to learn about the shares investment. If you are not aware of, Bloomberg came out mobile app that you can download it from Play Store / App Store for free. So we went to Watch list >> Counters >> Financial Summary section. I explained to him about the 3 items there:

  1. Income Statement
  2. Balance Sheet
  3. Cash Flow Statement

Income Statement (Summary of the Profitability of the Company)

  • It displayed the Net Profit, Revenue as well as Net Profit Margin. Basically this is to tell that the profitability trend of the company over 5 years as well as to check whether the company is doing well on its revenue as well as the profits. 
  • In general, we welcome a better and consistent net profit margin as well as rising revenue trend in long run. This is just to show that the company could increase its profitability over the years, and we as the shareholders could enjoy a better return that beats long term inflation rate. 

Balance Sheet (Summary of the Financial Condition of the Company)

  • Balance sheet summary here showed the total assets, total equity as well as total liabilities. It is to check whether the company's financial strength is still very strong. The second thing we could check from here is that whether the total equity portion could increase over the years without the right issues. 
  • In general, we welcome a good total debt to total asset ratio, as it requires the company to achieve the optimal debt ratio so that it could achieve the best weighted average cost of capital in long run. The company may survive during the market turmoils as its debt obligation is low and it may not need to make the huge amount of interest and capital repayment during the bad time. 

Cash Flow (Summary of the Cash Flow Movement of the Company)

  • Cash Flow summary shows Cash Flow from Operating, Cash Flow from Investing and Cash Flow from Financing. The cash flow statement basically shows you the inflow and outflow of the cash flow from these 3 sections - operating, investing and financing
  • Operating cash flow means that the cash flow generated or used in operating activities such as the net profits adjusted by non cash items such as depreciation and changes in working capital. 
  • Investing cash flow means that the cash flow used or generated in investing activities such as purchase of non-current assets as well as the long term investment in securities. 
  • Financing cash flow means that the cash flow used or generated in financing activities such as right issues / dividend payment / bond payment / bond issue etc. It is important to have a financing cash flow when the company which is in the expansion stage requires additional cash flow to support the investing cash flow other than from operating cash flow. 
  • Basically positive operating cash flow minus investing cash flow (CAPEX) would be treated as free cash flow and the company can make decision on how to use the free cash flow. The higher free cash flow in long run indicates that the company would have more free cash flow and they may increase the dividend payout to the shareholders if they do not need it for investment purpose. 
Above is just the summary of the discussion here. You are welcomed to learn more from here and share with us your thought of investing by analyzing the financial statement. 

1 comment:

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