Tag Archives: financial statement

01 – Current temptation, future frustration

Posted on by under Current temptation, future frustration

I have started with series “Once a darling, now an evil“ is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. This series has received lots of love and recognition. Majority of readers of the series has demanded current darling which can have the potential to become evil. I cannot refuse the request of all loyal readers who keeps on encouraging me.  So, on an auspicious day, I am going to start with this new series with all your love and wishes. I am trying to put some of the number-crunching facts by which we can identify ongoing issues in the companies and can save our wealth. I wish this series “Current temptation, Future frustration” also receive all your love and recognition.

I am starting this series with one of the company which is engaged in the business of high-end speciality chemicals, has a 52 weeks low price of Rs.0.95 and LTP is Rs.9.90. This company has rewarded ~10.42x of return in a year.

This company at least earns revenue. ? But revenue not growing and even going down year-on-year. Let’s look further because at the lowest price the company traded at Mcap/sales of ~0.15x.

It’s not time to get happy by just looking at the revenue. When we look at the balance sheet then we noticed that the company has higher receivables and inventories.

Receivable and inventory as a % of sales continuously growing with stable payable which will worsen cash flow from operating activities of the company.

Wow…. Let’s drive Volvo and Jaguar with the money of shareholders (the majority of shareholders are very busy and does not have time to look at this).

Advances to suppliers but still confirmation is pending (who will read it and check it, let’s play the game). 

Similar to the receivable’s products got sold but they are receivable or not they need to confirm. Wow….

There are lots of related party transactions which can create doubt.

Promoters of the company also reducing stake from the company.

This entire series is based on past available data and ignored the future development in companies and the stock market always looks at the future.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.

WORK TO LEARN — DON’T WORK FOR MONEY – RICH DAD POOR DAD

Posted on by under Bibliophile: Rich Dad Poor Dad

When we talk about the mindset of rich and poor people then both have a very reverse mindset. Rich people work for learning and poor work for security. These mindsets help to the rich for becoming richer. And poor to poorer. When we spend time for learning, the time we start creating our fortune.

We all focus on getting specialized knowledge to get promoted at the job. But rich dad suggests learning many in the basic. We should focus on every department and learn about all. When we have at least basic knowledge of every department then we get help while we start any of the ventures.

Rich dad valued learning to lead men out from dangerous situations. “Leadership is what you need to learn next,” he said. “If you’re not a good leader, you’ll get shot in the back, just like they do in business.”

If we are working somewhere then also, we need to focus on learning. Learning only help us to grow well. We try to implement what we have learned and if we got failed before the age of 30s then we have a chance to recover. Fear of failure and rejection stop us from acquiring learning and implementing it. It stops us from thinking about how and from where we get new learning. This mindset turns out to be unsuccessful. Our learning will prove more important in the long run to become richer. If we stop learning then we stop ourselves from growing. Learning can lift us in terms of the wise decision, wise person, better growth potential and become richer.

We need to learn the selling and marketing aspects of the business. If we can sell what we are good then we can earn a good amount of money.

For receiving more money, we need to give money also. It is a law of money, the more we give to the needy, the more we receive. It is also detachment from our wealth. The more we get detached, the more we receive back.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

Read for more detail: Rich Dad Poor Dad: What the Rich Teach their Kids About Money that the Poor and Middle Class Do Not!

11 – ONCE A DARLING, NOW AN EVIL

Posted on by under Once a darling, now an evil

The eleventh part of Series “Once a darling, now an evil”. This series is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the company is in the business of exports of software and IT related services which has an all-time high price of ~Rs.349 in 2012 and now last traded price at Rs.0.35.

Zylog 01

In the first instance this company having huge sales and profit growth. This creates a temptation to buy with missing out of the opportunity. But after the series of articles, we know to not get tempted with sales & PAT growth.

So, we go deeper ….

Zylog 02

Good return ratio ?, Huge debtor days with increasing payable days. I also want to meet an IT platform provider who keeps on giving good credit. (Actually, I want to meet and suggest those vendors to Infosys and TCS for taking services from these vendors because Infosys and TCS do not have such good payable days. It might be possible that this management is much better than the management of Indian leading IT companies.)

I would like to go further detail of it.

Zylog 03

If we look at the common size balance sheet then the majority part of the assets side was other assets and that is acceptable in IT firms as they do not have a fixed asset a lot. But here have receivables & Cash are most. Also, cash getting reduces and borrowings getting higher. Where is the cash going? The company might be purchasing assets but as an IT firm, they do not require to have a huge asset.

Zylog 04

I dive deep to check the strength of cashflow. I found that cumulative CFO of Rs.291 cr vs cumulative PAT of Rs.674 cr. If we check cumulative FCF then it will be -Rs.38 cr.

Zylog 05

Zylog 06

Now, if we see the cash flow statement in detail then we can come to know that company has capitalized many assets so that profitability of the company gets boosts but when we see adjust to FCF then it will be different than what we have observed earlier.

If we adjust cumulative FCF with capitalized assets then it comes to -Rs.357.33 cr and what we have observed is -Rs.42 cr from FY08-12.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.

This series contains learning from books –

Financial Shenanigans

Quality of Earnings

The Financial Numbers Game

Creative Cash Flow Reporting

THE RICH INVENT MONEY – RICH DAD POOR DAD

Posted on by under Bibliophile: Rich Dad Poor Dad

Often in the real world, it’s not the smart who get ahead, but the bold.

Our financial geniuses require both financial knowledge as well as courage to build wealth. If our fear is so strong then our geniuses also do not work. So that we have to be bold, have to take a calculated risk. We need to convert our fear into power. When our mind is emotionally unstable then we cannot make a wise decision and also, we invite situations which are harmful to us only.

Many of us waiting for the opportunity but we should create an opportunity to get out of the rat race. This thing requires financial intelligence.

We have to understand that money is not real, the important is our mind. If we train it well, then we can defiantly create an enormous fortune.

We can use many available opportunities or can create an opportunity for inventing money. Many of the people save money and invest in the assets from where they get safer interest. But this interest is being taxed. This is a safer option but not a smart option. We have to be financially intelligent to think and make all such wise decisions.

RDPD05 01

The problem with “secure” investments is that they are often sanitized, that is, made so safe that the gains are less.

Great opportunities are not seen with our eyes. They are seen with our mind.

Winners do not have a fear of losing in the mind. But losers always have it. This fear stops losers for achieving success.

If we want to become a more professional investor then we need to acquire skills such as –

  • Find an opportunity which everyone else missed – we have to focus on the opportunities which all others have missed and work on it.
  • Raise money – we need to identify alternatives for raising money except for bank.
  • Organize smart people – we need to hire people smarter than us to get advice.

What we know is our greatest wealth and what we do not know is our greatest risk. We need to manage risk, need to learn rather avoid it. More we train our brain; more we acquire knowledge the more we can become opportunistic to acquire more wealth.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

Read for more detail: Rich Dad Poor Dad: What the Rich Teach their Kids About Money that the Poor and Middle Class Do Not!