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Type of Securities Investment Strategies Fundamental Analysis Technical Analysis
Understanding Financial Statements Income Statement Analysis Balance Sheet Analysis Cash Flow Analysis Shareholders' Equity Analysis Ratios and Definitions


Balance Sheet Analysis

 - Leverage and financial
   strength affect share value

 - Liquidity concerns can
   decimate a business

 - Cash is critical, to a point
    * Window Dressing
    * Cash Gap
    * Cash per Share
    * Burn Rate

 - Marketable Securities

 - Receivables are interwoven
    with cash flow
    * Past Dues and Write-offs
    * Receivables turnover ratios
    * Securitizations

 - Inventory - focus on the
   profit margins
    * Perpetual vs. Periodic
       Inventory
    * Inventory Accounting
       Calculation
    * Inventory Costing Methods
    * Lower of Cost of Market
    * Inventory Categories
    * Inventory Turnover Ratios

 - Fixed assets are necessary in
   order to be a world class
   company

 - Liabilities with equity attributes
   are enriching

 - Emphasizing debt net of cash
   can be misleading

 - Book value is a tool to
    properly evaluate a stock

 - Off-balance sheet assets and
   liabilities are legal

 

 


 Burn Rate

There are also those research type companies that raise equity and invest in R&D, in the hopes of developing a product. In such situations, one needs to review the running rate (“burn rate”) of losses, or cash drain. Normally, the burn rate is expressed in months or years.  The burn rate determines when product sales must start generating enough cash flow to cover expenses, or when additional equity is needed. 

While companies can be truly creative with insufficient cash, it’s hard to function without proper capitalization. It is important, therefore, to invest in well-capitalized organizations; leave companies with insufficient cash to the speculators.

Click here for information on:
Window Dressing
Cash Gap
Cash Per Share

 

 

 

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