(281)-719-8904 KenFaulkenberry@AAAMP.com
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## Altman Z-Score Formula – Screening For Bankruptcy Risk

As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.

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## Return on Capital – Calculations & Ratios

Return on capital ratios provide the value investor with quality metrics that can be employed after, or along side, valuation metrics. This allows the long term investor to look for “wonderful companies at a fair price” (Warren Buffett).

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## Return on Total Assets – Ratios & Calculations

Return on Total Assets Ratios provide analysts with an indication of management efficiency in utilizing company assets to create profits. Because it includes all (total) assets (assets funded by debt and equity) it is a profitability ratio that interests both creditor and equity stakeholders.

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## What is Cash Flow From Operations (CFO)?

Cash Flow From Operations (CFO) is an important line on the company Cash Flow Statement . It is the cash inflows and outflows of a company’s core business operations. The cash flow statement defines three types of cash flow :

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## What is Owner Earnings and Owners’ Cash Profits?

Owner Earnings and Owners’ Cash Profits are similar types of cash flow for analysis of businesses and stocks. These metrics provide important insight into the cash flow of the entity, particularly the cash flow available for the owners.

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## Types of Cash Flow and Cash Flow Calculations Guide

Are you ever confused by the different types of cash flow for investment analysis? There are too many cash flow calculations for most of us to have in memory. I know I get them confused and I’m a seasoned investor.

I believe you will find this a useful guide to the different types of cash flow and cash flow calculations, along with practical step by step comparisons and uses for each metric.

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## Working Capital and Working Capital Calculations

Working capital is an important measure of a company’s operating liquidity. The working capital ratio (a.k.a current ratio) is an indicator of the ability of the company to meet its short term obligations.

Working capital calculations such as Net Current Asset Value (NCAV) and Net Net Working Capital (NNWC) provide valuable metrics with which to measure against price in order to identify bargain stocks.

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## Enterprise Value (EV) & Calculating Enterprise Value Ratios

Enterprise value (EV) and Enterprise value ratios are part of the basic foundation of stock analysis for value investors.

The purpose of Enterprise Value (EV) is two fold; First, to calculate what it would cost to purchase the entire company or business. Secondly, to provide a capital neutral valuation with which to compare with other companies.

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## Net Cash Flow and Cash Flow Earnings

Net Cash Flow is important because it tells an investor how much cash a company is generating. After a company creates a product or service and pays all of its bills, the cash flow earnings is the cash the business has available to make money for the shareholders.

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## Cash Flow Statement Analysis: Purpose, Components, and Format

The purpose of the cash flow statement is to show where an entities cash is being generated (cash inflows), and where its cash is being spent (cash outflows), over a specific period of time (usually quarterly and annually). It is important for analyzing the liquidity and long term solvency of a company.

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## Income Statement Format, Components, and Purpose

The purpose of the income statement is to provide the financial earnings performance of the entity over a specific period of time. It is also referred to as a profit and loss statement or earnings statement.
The components of the income statement format allows for dissecting the revenues, expenses, operating income, and profits of an entity.

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## Explain Balance Sheet: Define Assets, Liabilities, and Net Worth

The balance sheet is a summary of assets, liabilities, and net worth (book value) at a specific point in time. The balance sheet is the foundation of the entity.

Whether an investor is looking for dividends, value, quality, or companies with sustainable competitive advantages, the foundation of each strategy is finding companies with a sound balance sheet. This is because the financial position of the entity affects everything it does and is able to achieve.

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## Piotroski F-Score Test – A Value Investing Strategy for Your Portfolio Management Tool Box

The Piotroski F-Score Test is a value investment analysis tool to identify stocks of companies with good fundamentals and eliminate stocks of weak companies. Piotroski developed a 9 point F-score ranking system that has produced an incredible performance record of finding quality investments.

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## Purpose of Financial Statements

The purpose of financial statements is investment analysis using the financial position (Balance Sheet), profitability (Income Statement) and operating, investing, and financing activities (Cash Flow Statement) of a company.

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## What is Operating Cash Flow?

Operating cash flow (OCF) is cash generated from normal operations of a business. As part of the Cash Flow Statement the cash flows of the operating activities, investing activities, and financing activities are segregated so the analyst can get a clear picture of the cash flows of all the company’s activities.

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