Financial Analysis
What Three Years of a Cash Flow Statement Reveals That One Year Hides
Profit is an opinion, cash is a fact, and one year of cash flow is a snapshot. It takes three years for the snapshot to become a story.
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Earnings Quality
7 pages carry this tag.
Analysis
Concept Guides
Concept Guide
Common Adjustments (leases, ESOPs, one-offs)
Reported financial numbers are a starting point, not the end point. Analysts adjust reported figures to make them more comparable across time and across companies.
9 min readRead more
Concept Guide
Quality of Earnings
Not all profits are equal. A company can report ₹100 Cr of PAT that is backed by ₹120 Cr of operating cash flow, high quality earnings.
10 min readRead more
Formulas & Ratios
Formula
CFO to PAT Ratio
The CFO to PAT ratio compares five years of cash flow from operations with five years of reported net profit. It is the simplest anti-fraud check in fundamental analysis.
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Formula
Free Cash Flow
Free cash flow is operating cash flow minus the cash the business is forced to reinvest to keep running and growing. It is the money that is genuinely surplus.
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Formula
Cash Flow per Share
Cash flow per share is operating cash flow divided by the number of shares. Set next to EPS, it shows how much of each share's reported profit actually arrived as cash.
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Interactive Lessons
Lesson
Spot the Red Flags
Work through realistic case studies and identify the warning signs of financial distress and poor earnings quality.
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Related topics: Valuation, DCF, Relative Valuation, Cost of Capital, Financial Statements, Cash Flow, Red Flags, Ratios