Dalal Street loves Profit and Loss statement because that where one finds all the metrics such as quarterly revenue, EPS, EBIT, EBITDA and margins. Therefore, Profit and Loss statement should be the most important financial statement. Nope!
I believe the most important financial statement is the cash flow statement. Unfortunately, it does not get a same level of attention as given to income statement. The reason analysts look at revenue, EPS, EBIT, EBITDA and margins, is that they are trying to estimate a cash flow number for future. They attempt to deduce the future cash flow. While I do believe that all three statements have its own reason to exists, it is the cash flow statement that is the true reflection of the current state of companies business. Continue reading rest of this article…
Reflecting on My Investment Year 2008
Reflecting back on Year 2008, I think it will go down in history as a very significant turning point in the global economy. I also think that, due to events in Year 2008, other developed economies and emerging economics will evolve in different way. By different way I mean with reference to how it interacts with US economy. For the last few decades US economy was the engine of growth for global economy. US economy with its ingenuity, entrepreneurial business environment, innovative mindset, institutions, and rule of law was the global consumer. The other economies were happy being the supplier. Moving forward, this status will be challenged depending upon how US policy makers deal with the aftermath of events in 2008. While US business environment is still very much entrepreneurial, it remains to be seen how it will adapt to the new economic environment. History shows it has always adapted. Time will tell if it does this time also? By no means I am professing dooms day scenario, all I am saying is things will be different than what/how it used to be. How different, I do not know. Continue reading rest of this article…