Investing Basics - Feel free to ask the most basic questions

(Bhupesh) #756

I sent few question to a conpany’ (a 2000Cr+ MCap company from a reputed business house) Investor Relations id 5 weeks back. After 5-6 days I asked them to atleast acknowledge my mail if reply is getting delayed. They did acknowledge the mail after that reminder, but have not come back to me yet.

10 days back I also mailed same set of questions (with minor modifications) to their CFO, no reply from her also.

They do Quarterly earning call, and business channel interviews. Is 5 weeks too early to expect a reply from them.

(Bhambri3) #757

Can someone explain me the difference between term and non term advances ?

(Saravanan B) #758

You email the company secretary.

(saurabh shankar) #759

Term Advances–> They are usually term loans with fixed repayment schedule generally given for tenures more than 1 year
Non-Term Advances–> Usually working capital or short term loans

(lalani123) #760

How do one read cash flow statement when year to year is uneven to value a stock ? This theme is also observed in high market cap stable stocks too.

(Abhishek Basumallick) #761

The whole idea of reading the financial numbers is to to try and understand the story of the business from it. What does it tell you about the nature of the business. How does it inter-relate with other fin statements like the P&L and BS. Most of the time, in my experience, the absolute numbers are less important than the underlying trend it displays.

(Bheeshma Sanghani, PhD) #762

Hi all,

Does someone on the forum have the weekly closing prices of all listed stocks for the past 1 year in an excel sheet…will appreciate it if it can be shared. Alternatively if someone can point to a resource where I can download all of them it in one shot it would be great! It would be nice if they are adjusted for splits and bonuses etc


(EL) #763

I think Excel might not be able to manage that much data
If you know ruby you can scrape it from bse

The owner of phreakonomics (on this site) and screener will have it in database. Try asking them.
If you don’t know ruby I can try to scrape it for you but will have to be after a week
If you want to do it yourself, I’d try ruby with watir and nokogiri
It’s not really that complicated
Store it into something like SQLite which then excel can call by company id
You will then need a daily script to populate daily closing as well
Are you building a model or something ?

(Bheeshma Sanghani, PhD) #764

Hi edward, thanks for your assistance. I have no clue what ruby, watir or nokogiri mean. As of now i have downloaded bhavcopy and am doing vlookup in excel. Any tool though would be appreciated and whenever you have time or the inclination would be most eager to learn.

Thanks again for your prompt response and your suggestion of getting in touch with phreak.


(S_Banerjee) #765

Will it not require a server hosting? And any kind of scripting language should have permission to access BSE server to extract data from it. Is it that easy to interact with BSE server? I guess permission hurdles may arise. I am not sure, want to know the process,so asking.

(Shivram) #766

Hi lalani123,

This is going to be a long answer, so if you want a short answer, I suggest you skip to Section B, things to look for in the cash flow. I am interpreting the words “value a stock” in your question as understanding the quality of the company as against performing a DCF calculation.

Before I get into the answer, a short summary of what the cash flow statement contains so that we are all in the same page.

SECTION A - About the cash flow statement

A. Cash from operating activities - The section contains the cash the business made from operating activities. Ideally, if the company works on a pure cash basis, this number should be equal to PAT + Noncash expenses (like depreciation / amortisation) + Interest and other non-operating income/expense paid/ received. But because companies provide and take credit not all revenue and costs are received and paid in the same year. Hence adjustment is necessary to the operating cashflows for

a. net cash received or paid in current year pertaining to revenues and costs incurred in prior years and

b. net cash receivable or payable in future years pertaining to revenues and costs incurred in current year

This is the reason why there is an adjustment for change in working capital (which really gives the sum of a and b).

However, certain quirks you should be aware of

a. Where practical taxes on non-operating income / expense are not shown as cash from operating activities

b. US GAAP requires interest to be shown as cash from operating activities. Better to look at the actual cash flow statement to understand what exactly the business has done to interest costs and taxes saved on it.

It is therefore important to go through the cash flow statement to understand how the above items are classified so that you use the right metric to analyse the cash flows.

B. Cash used in investing activities - This is the cash used by the business is purchasing (or selling) fixed assets and other investments.

C. Cash from financing activities - This is the cash received/used by business in paying interest (net of receipts), dividends, taking and repaying loans or any equity / debt whatsoever.

Keeping the above context in mind and considering that you are a long term investor who wants to invest in companies that are expected to generate cash over the long term, this is how I would understand the cash flows.

SECTION B - At the outset it makes no sense to look at cash flows of one year. What is important is to look at cash flows of a few years. Ideally this few years should cover an economic cycle (recession – recovery - expansion – boom – contraction - recession) so that you are able assess how well the company is able to do across the economic cycle.

To analyse the cash flows, it is also important to understand the industry structure in which the business is operating in. Is it in the growing, mature or cyclical industry. (I have not considered dying businesses as I am not sure if they are worth investing in).

Things to look for in the cash flow

  • Across the economic cycle, compare the sum of PAT + Non-cash expenses + non-operating expenses (Book Profit) with the sum of operating cash flows (Cash Profit) during this same period. This can be expressed as a ratio (BP / CP). In a mature business this should ideally be more than 1. In a growth business you can expect this to be less than 1. In a cyclical business this can be expected to be around 1. Reasoning – Mature businesses can expect to have a stable cash recovery and payment cycle. Growth businesses tend to give out comparatively more credit in its quest for growth. The ratio for cyclical business will be impacted by the severity of the economic cycle on its cash collection cycle.
  • Another metric to look for is cash from operating activities - cash used in investing activities. This is also called as Free cash flows. Ideally a mature business, this should be consistently positive, for a growth business this may expected to be negative and for a cyclical business this may expected to be highly fluctuating but positive over an economic cycle.
  • Finally, if we look at the cash from financing activities. Mature businesses may be expected to pay out more dividends and require little financing. Growth companies tend to pay out very little (or nothing) and may require a lot of financing. Cyclical companies tend to borrow a lot of cash in expansion and boom years and not much during recession and recovery periods.

A forecast of all 3 items will be very relevant for valuation of a stock.

Any inconsistency in your expectation needs to be looked into carefully. For example, a mature business having negative free cash flows is a warning sign. A growth business paying out dividends and then borrowing a lot of money is also a warning sign. However, a growth business not borrowing a lot of money is a positive signal.

In any case, you should remember that it is toughest to forecast cash flows of growth companies as there tend to be simply too many variables driving growth.

One should also exercise caution in completely relying on the cash flows of growth businesses, as you expect negative operating and free cash flows, coupled with high borrowings. Such a scenario could also indicate that the company is really not making any money and is really fudging its books of accounts to show high book profits.

Finally, cash flow analysis / valuation is only one of the indicators in fundamental analysis. I believe, understanding the industry structure, competitive landscape of the business, valuation (relative and absolute) at current prices, financial metrics especially ROCE / ROE, business and financial risks are other important factors that need to be considered before finally deciding on an investment.



(inonix) #767

Question on ESOP, from AgroTech AR 2018, **
The Company instituted the "Agro Tech Foods Limited Employee Stock Option Plan’ (“Plan”) to grant equity
based incentives to its eligible employees. The Company has established a trust called the Agro Tech ESOP
Trust (“Trust”) to implement the Plan. The Company has given advance to the “Trust” for purchase of the
Company’s shares and advance outstanding as at 31 March 2018 is 502.38 ( 558.00 as at 31 March 2017
and 560.35 as at 1 April 2016). Under the plan a maximum of 23,436,926 options will be granted to the eligible employees. All these options are planned to be settled in equity at the time of exercise at the option of the employee. These options have an exercise price of 561.00, 597.55 and 589.75 per share granted during the years ended 31 March 2014,
31 March 2015 and 31 March 2016 respectively and vests on a graded basis as follows** .
Does this mean , once all the options are exercised, the outstanding shares will be almost double?
Also for the options exercised this year, I couldn’t find any increase in outstanding shares from last year. And Other Equity shows employee share based payment as 21.14 ?
Any clarification on this much appreciated.

(VijayShetty) #768

Do any of the aggregator sites (sites like, morningstar etc) give R&D expenses in the P & L Statement? I looking for either 5 year or 10 year data

(lalani123) #769

When a company acquires a different company, where does it go in Cash Flow. I was looking at Cash Flow of 8K Miles Software in and know they acquired many companies over the last few years and was expecting to see them in Cash Flow Investing Activities but didn’t see that. Also cash flow statements Upto March 2016 shows no taxes paid - however in Yearly P&L, it displays that. How can that be tied.

(pennywise) #770

Most companies are reporting their sensitivity to USD/Eur/Yen etc under the currency risk section of the annual report. Most companies’ sensitivity analysis shows that the impact of fluctuations in USD does not impact their bottom line materially (For eg TCS annaul report 17-18 page 154 -

My question is : Why does the market not consider this sensitivity analysis useful and continue to buy exporters in times of rupee depreciation even though companies have hedged their positions?

(Karan Sharma) #771

The participants who read the annual report and base their decision making on the inferences from the content are investors while the market participant’s who you talk about are traders who want to take advantage of a situation for a small amount of time without knowing the subject matter in detail or whether it actually will have any effect at all

(pennywise) #772

Makes sense. Thanks !

(sainkar) #773

How to calculate IRR or portfolio returns?

Can anyone please guide me on how to calculate yearly portfolio returns. Or provide pointers on blog / site for clarification.

Let’s take a base example so my query makes clear:

  • Assume by 31 Dec 2017 I have portfolio of 1 Lac comprising TCS (Rs 60000) and BSE (Rs 40000)
  • During August I added Rs 20000 TCS shares and in October Rs 10000 HDFC Life Insurance shares.
  • By 31 Dec 2018 my current Portfolio is of 1.26 Lac
    So what is the Portfolio return?
    How to know PF performance with Nifty?

(Chandragupta) #774

Check out the XIRR function in excel. You just have to write the cash flows and dates in two columns side-by-side. Write the portfolio value for the last date. XIRR will give you the portfolio returns.

(Yogesh Sane) #775

Here you go.


All cash inflows should be negative including starting balance. All cash outflows should be positive including ending balance.
For Nifty performance, take starting and ending index.