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- Getting Started: The Income Statement
- Getting Started: The Balance Sheet
- Getting Started: Fundamental Analysis
- The Finance Professor: How to Read an Income Statement
- The Finance Professor: Getting Started With Financial Statements
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When you look at the statement of cash flows, ask yourself: "Does this company need cash?" A favorable operating cash-flow ratio and a decent proportion of investment-related financing are good signs. The operating cash flow ratio measures how well cash covers current obligations. To calculate this ratio, divide cash flows from operations by current liabilities
. With this ratio, a bigger number typically means a better business outlook.
Ideally, financing is mainly used for the purposes of investing in the company, not for operations. One way to check is by comparing the cash from financing with the cash used on investing activities. If these numbers are pretty close to each other, things look good. If these numbers are not close, I would want to know where the rest of that financing was going before I put my investment money in.
Despite not being as well known as the other financial statements, the statement of cash flows can be another effective way for you to measure a company's pulse and overall health ("Getting Started: Fundamental Analysis").
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Learn how benchmarking can help you sharpen your fundamental analysis skills.
A breakdown of how to decipher a company's income statement.
A breakdown of what to review before you look at any numbers.
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Keep on top of the market and the critical information you need to make more profitable investing decisions.
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