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Place for newbies to ask any and every Investing Basics/Personal Finance Question.

And the place for Learners and Senior Practitioners to pay it forward ( for all the learning we have been fortunate to be gifted by our seniors/gurus)

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Hi ,

I have a Confusion that if a company has reported a negative Cashflow for a year than how can its Reserves increase.

I am taking example of Force Motors: (Taken the data from Screener.in)

Reserves in Mar2013= 1139 Reserves in Mar2014= 1212

However there cashflow statement:

Cash from Operating Activity 120.67
Cash from Investing Activity -99.57
Cash from Financing Activity -30.18
Net Cash Flow -9.08


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The net worth (which is were reserve gets is added) is accrual base concept while cashflow is determine based on actual cash inflow/outflow. While the company has sold goods in March quarter, typically it gives credit of 30-90 days depending on sector/trade practices. Hence, while sales would be booked, there would cash out flow due to increase in working capital by receivable.

With sales booked on accruals basis, cost on accrual basis charged to P&L and what is left over is Net profit (adjusted for dividend) gets added to net worth. Hence, profit and loss would be postive, but due to receivable day, cashflow would be negative. Generally, positive cashflow from operations gives indication of bargaining power of the company with suppliers and customers. I personally like to invest in the companies where cash flow from operation is positive. However, there could be exception and many companies in growth phase may have negative operating cashflow.

Having said, consistent negative cash flow from operations over say 5 years periods, is not at all encouraging sign and in fact an earlywarning signal. The business is actually sucking cash then generating it to be returned to stake holders.

Hope I answered your query.

All the best

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Thanks Dhiraj Ji for your answer.

It means that looking at cashflow for only one year wont lead to any conclusion.

For example because it might be possible that company might receive the cash for it sales in next financial year.Thus based on sales booked it might be showing profit but negative cashflow for this year.

For example below is the case for PC Jewellers: Last four years Cashflow statement

                                              2011        2012        2013          2014

Cash from Operating Activity -29.33 337.71 519.60 -809.66
Cash from Investing Activity -11.63 -37.90 -583.02 246.19
Cash from Financing Activity 19.24 367.84 131.95 594.79
Net Cash Flow -21.72 -7.76 68.53 31.31

Now I see that in 2014 the company is showing negative cash from operating activity that might be because they had to pay for the gold upfront due to government regulations and will be receiving cash only after sales of items using this gold.

Now in this case should this negative Cashflow act as deterrent??
My answer based on above assumption should be NO.

But would like to know your views


As I said, it would depend on your confidence in business and management. The best is to have positive cashflow which indicate good bargaining power with supplier and customer. Having said that one of year negative cashflow shall not mater much. However, I would suggest you compare it with sale. Ina bove example, 519.6 got converted in negative 809 operating cashflow in FY14. That means, in FY13, the company generated operating cashflow of Rs 520, which not only declined but also utillised Rs 809 in business. The scale when seen in context of sales would give more idea. If sales has increased, it may due to push from the company (by extending higher debtros days etc). If sales decline and cashflow from operation is negative, the company is worse situation on collection of receivable. In either case, it need more investigation.

In nutshell, one year would not concern, but scale of change is volatile in your example which required further understanding

@Donald i m new to investing , may be this Q is answered many time on this forum and i m unaware of that thread .

i dont have any accounts background , i want to start . just wanted to know how should i start, should i start reading annual reports of different companies or some books or something else .

i don’t have clear path to start as of now .

I m a full time volatility trader from last 2.5 year , doing all trading with semi automated software and trying to shift from trading to investing .

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  1. Start with a good easy to read book : One Up on Wall Street Peter Lynch

  2. Start simultaeously reading a few Annual Reports of Businesses you admire. Pick up something discussed at the Forum by lots of people - say like Ambica Cotton, or Premco Global - try and understand the Business

  3. Try to understand what makes the business unique, special - why is it difficult to dislodge

  4. Spare time to read - there is huge learning captured here at VP

Read the entire Hall of Fame threads and Learning threads
Cmpare theory (what you earn from Books or VP Gyan) with practicals all the time - by reading up on Showcase discussions - like Mayur, Astral, Ajanta, Kaveri, Ambica



it took long to complete one up on wall street but still it was a good read . these read are not only helpfull to investor but also to full time day trader like me .


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@Donald i was watching GPPL profit and loss statement . how they don’t pay any tax before profit ?

Robin - Pls STOP using this thread. This one was about the category. (but we indulged your query here)

Any new questions please feel free to put up a new post in the Investing basics Q&A or Company Q&A category as necessary

Hi every one, I am new in investing into stocks, as well as in this forum. I am trying to follow value investing based on my limited knowledge and also trying to learn each and every day from various sources. One major issue I am facing since last 1 month, is I have identified couple of blue chip stocks, but I feel, this stocks are not giving me a position to enter, they prices have gone up too high, in recent years, so, what should be done in this scenario. I am sure, some of the seniors have also faced similar situations in your life, please advice on this.

example of those stocks CMP:

  1. HDFC bank, 160 in 2008 vs 1200 in 2017 jan/feb.
  2. maruti suzuki 1800 in march 2014 vs current 6100 in last 2 months…
  3. TCS: 255 in 2008 at some point vs todays 2120 in 2017…

there are so many example that you also know like eicher motors…
So, my concern is, for people like me, who are starting their stock market journey in 2017, all these blue chips are trading at a very high level, how do I enter??
Only times like budget day/demonitization/sugical strike day etc??

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Disclosure: I am not a stock market broker, and I am not even holding any of the stocks mentioned above…

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Is capitalising interest cost a bad or a good thing? Can one explain with an example?

Capitalisation of interest cost happen during new project implemention phase. Typically a borwnfield or greenfield expansion take around 12 months to 48 months depending on nature of industry/size of project. The funds are required for land purchase, machinery purchase and installation which are spent before project is ready for commencement of production. The cost of borrowed fund during the implementation phase is not charged to P&L and get capitalised in total cost of project in fixed assets.

However, many times, bad management continue to show not prgoressed project as under implementation and charge interest cost to Fixed assets instead of P&L. You can go though dirty Twele referrred under Insolvancy by RBI. Most of cases, like Bhushan, Electrosteel, Monnet would have large interest compenent being capitalised.


Is Interest Paid and Interest Outgo/Outflow are same? it does not look like though.
As i was reading Dr VijayMalik report on Garware wallropes, i found these 2 different items. Tried to find on google but no use.
Here is the the screenshot.

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I am new to stock market and learning the basics. Can any one please help me to calculate TTM BOOK VALUE, TTM ROE and TTM ROCE of any company.
I searched a lot to find out how to calculate these TTM ration in google and also in this forum but yet to get success. If it is already given in this forum then please give me link of such post.

Respected sir please help me out with the knowledge how to evaluate stocks for long term investment moreover what all has to be kept in mind while assessing a particular stock for its growth

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Sir how to identify moat of an IT company.Most of the companies have advantage of network effect and I can’t find what makes the unique among them.