Free Cash Flow vs. Adjusted EBITDA

Executives of public companies like to paint their businesses in a positive light. When communicating with investors – a process known as investor relations – they will make various adjustments to their financial statements to try and convince Wall Street to buy stakes in their businesses. The most popular of these is adjusted EBITDA. You’ve […]

Accounts Receivable Vs. Accounts Payable and the Working Capital Cycle

In today’s business world, intangibles have grown in importance, but “old school assets and liabilities” such as accounts receivable and payable have grown in relevance. With the rise in SaaS businesses that rely on subscriptions for revenues, understanding how the business recognizes revenues and when those monies arrive in their accounts carries more importance in […]

Free Cash Flow Yield – Finding Gushing Cash Flow for Future Growth

Cash is king, and free cash flow acts as the engine’s oil. Determining free cash flow and its different uses remains a fantastic way to find great companies that grow into the future. Free cash flow yield remains an incredibly easy way to find those companies; some say it remains better than the price to […]

Financial Accounting for Beginners: Debits/Credits, P&L, Assets/Liabilities

Updated 8/7/2023 Recently, Berkshire Hathaway earned $81.4 billion in 2019, a 1,900% increase from the year before! How was this possible, by an accounting rule instituted in 2018 that requires companies to include in their bottom line gains from their stock portfolio, even if they don’t sell the stock. Buffett vehemently disagrees with this accounting […]

The 3 Important, Main Components of Debt Analysis (+Metrics)

Updated 7/24/2023 “If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.” John Maynard Keynes In today’s low-interest environment, debt analysis must be a critical part of every investor analysis of companies. As the low-interest rate continues, more and more companies will turn to debt […]

Debt Financing Vs. Equity Financing: The Grudge Match

Updated 7/24/2023 CEOs have one job, to deploy company capital in a way that grows the company. To do this, they have a choice: use debt financing vs. equity financing. Whichever choice they choose goes a long way towards the continued profitability of their company. Ratios such as return on equity, capital, or invested capital […]

How to Calculate Market Value of Debt (With Real-Life Examples)

Updated 6/24/2023 Companies need financial capital to operate their business. Many companies raise capital by issuing debt securities (bonds) or selling stock. The amount of debt a company has that makes up part of the overall capital structure of a company has many risks and return ramifications. When analyzing a company measuring the amount of […]

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 […]

The 3 Main Profitability Ratios Used; with Average Industry Profitability Stats

Updated 3/6/2024 Profit remains the goal of every business worldwide, but how do we track a company’s profitability and compare it to another’s? Profitability margins help answer both questions. Using the three main profitability margins remains the fastest and easiest way to determine a company’s profitability, and the ratios are simple to calculate, too! Revenue […]

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 […]

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