Non-Controlling Interest in Financial Statements
On a consolidated balance sheet of a major company, you will likely see non-controlling interest come up so it is important for investors to understand this common item and ensure to back it out for valuation purposes. This article will teach investors all about non-controlling interest as we walk through Coca-Cola’s 2022 financial statements and […]
Maintenance Capital Expenditures: The Easy Way to Calculate It (With Calculator)
Updated 4/21/2023 To continue our series on owner earnings, I thought we would do a deeper dive into maintenance capital expenditures or maintenance CapEx. When calculating owner earnings, most of the values are pretty straightforward. But maintenance capital expenditures require a little more digging to come up with a number that we can use for […]
How to Read the 10-k (Annual Report)
If you want to learn more about a company or invest in a company, you can find a plethora of information on the company’s annual report, otherwise known as a 10-K. The 10-K offers an in-depth look at a public company’s financials, the risks it faces, and operating results for the previous year. Warren Buffett […]
How to Calculate NOPAT with an Example
NOPAT is an important measure of profitability. Investors use NOPAT to measure cash flows and ROIC (return on invested capital). Our goal as investors to find profitable, high-quality businesses remains job number one. We want companies with high margins, low debt, capable management, and stable operations. Companies generating high levels of NOPAT have great free […]
Stock Based Compensation Expense and FCF Explained In a Simple Way
Edited 3/24/2023 Accounting for stock based compensation expense can be tough. The numbers don’t always line up from the income statement to the cash flow statement. Also, stock based compensation (SBC) is either automatically included or excluded, depending on which Free Cash Flow formula you are using (FCFF or FCFE). Over the long term, the […]
Working Capital vs Current Ratio – Don’t Calculate WC the Wrong Way!
There’s a subtle difference between working capital and current ratio. Though both can be calculated from the same place in the balance sheet, they are not one and the same. Working capital and current ratio paint two separate pictures about a business. To understand those pictures, we need to know the subtleties of each formula. […]
The 3 Main Profitability Ratios Used; with Average Industry Profitability Stats
Profit remains the goal of every business in the world, but how do we track a company’s profitability, and how do we compare the profitability of one company to another? Profitability margins help to answer both questions. Using the three main profitability margins is the fastest, easiest way to determine a company’s profitability, and the […]
Your EBITDA Margin Guide: How to Use, the Controversy, Real Examples
One of the more popular metrics to take the financial community by storm over the last twenty years is the EBITDA margin, which companies use to determine their operating profitability. The EBITDA margin is a quick, easy way to determine the profitability of any company, but it does come with a little controversy. If you […]
Contribution Margin and Unit Economics in Investing
Contribution margin is used in both investing and management accounting to make decisions regarding profitability, project feasibility, and unit economics. Contribution margin measures the incremental income associated with each additional unit of production. Particularly when investing in growth companies, contribution margin and unit economics should be analyzed very closely to understand the scalability of the […]
Defining a Good FCF Margin Formula: Basics, Examples, and Analysis
Updated 4/6/2023 FCF margin is a valuable tool for understanding how much free cash a company can generate from its revenues. In general, a higher FCF (Free Cash Flow) margin means a company doesn’t need to spend much money to create profits and free cash. Why is FCF Important? Free cash flow is the amount […]
