Why Is the Increase in Working Capital a Cash Outflow?
In finance, there is a clear distinction being made between accounting earnings and actual cash flows. Earnings are also known as net income: They represent what a company has earned on their revenues over a measured time period after subtracting all the associated costs, operating costs and financial expenses to arrive at the bottom line […]
What Does a Negative EPS Mean?
What’s EPS? EPS stands for earnings-per-share and represents the total earnings or net income of a company on a per-share basis. It’s a financial metric that can be calculated by dividing a company’s net income by its number of shares outstanding: Calculating EPS is pretty straightforward: If a company reported a net income of $50 […]
Free Cash Flow vs Net Income: What’s the Difference?
In finance, you will often hear about two measures that accountants, analysts, and investors refer to the most when they review a company’s financial health: Net income (also known as earnings, or net profits) and free cash flow (FCF). Both metrics are measures of profitabilty and financial performance. But what exactly seperates free cash flow […]
DCF vs NPV: What’s the Difference?
In valuation, the primary approach of coming up with a value for any cash-flow-generating asset is by adding together all its future cash flows at their present value, by discounting them with a risk-adjusted discount rate. “The intrinsic value can be defined simply. It is the discounted value of the cash that can be taken out of […]
Negative Operating Income: Causes and Meaning
What’s Operating Income? Operating Income is a profitability measure and represents the revenue of a business that is left after deducting the cost of goods sold (COGS) and operating expenses. It is regarded as a useful component for many accounting metrics since interest payments, taxes, and other financial expenses aren’t included in the measure yet. […]
How to Determine Whether a Stock Is Undervalued or Overvalued
The core of fundamental investing is to assess a company’s intrinsic characteristics in order to differentiate between overvalued stocks, fairly traded stocks, and stocks that are trading below their value. This article is going to introduce the topic of stock valuation and walk through approaches of how you can assess whether a stock is under […]
What Does a Negative PEG Ratio Indicate?
What Is the PEG Ratio? The PEG ratio is defined as a company’s price-to-earnings ratio (P/E) divided by the expected growth rate of the company’s earnings. Using the PEG ratio can be beneficial as it eliminates a major flaw of the P/E ratio, which is the fact that the earnings multiple doesn’t reveal any aspects […]
How Long Should You Hold Stocks?
One of the many common questions that you might ask yourself as an investor is how long to generally hold on to a stock and when to sell it. Stock prices are mostly volatile and can heavily fluctuate in both directions. Sometimes it can be daunting to see your investments constantly moving up and down […]
What Is a Good Current Ratio?
What Is the Current Ratio? The current ratio is one of the several liquidity ratios that can be used to evaluate a company’s short-term liquidity, or in other words, the company’s ability to pay down short-term obligations. Short term obligations include those that are expected to be due within one year such as short-term bank […]
What Is a Good PEG Ratio?
The price/earnings to growth ratio also called the PEG ratio is a fundamental metric that can be used to broadly evaluate the value of a company. The PEG ratio is fairly similar to the price-to-earnings ratio but additionally takes the growth factor of the company’s earnings into account. This essentially eliminates one of the primary […]
