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 […]
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. […]
Net Debt to EBITDA Guide: Risks, Valuation, Examples, and S&P 500 Data
Of the many ratios to measure risk with a particular stock, the Net Debt to EBITDA ratio is one of the more common you’ll see listed in company financials. The logic is simple, and the ratio isn’t terribly complex, so I’ll show you how to easily source it in this post. Feel free to skip […]
The Basics of Computer Software Depreciation – Common Q’s Answered
Some parts of GAAP accounting rules can be more tricky, and software and how it is depreciated can be one of those. Most software is depreciated over a useful life, but there can be a type of software which is not depreciated (if it is considered R&D software). First let’s talk about depreciation and amortization, […]
Simple Balance Sheet Structure Breakdown (by Each Component)
“Never invest in a company without understanding its finances. The biggest losses in stocks come from companies with poor balance sheets.” Peter Lynch The ability to read a company’s financials, such as the income statement, balance sheets, and cash flow statement, is a key source of data for investors, both do-it-yourselfers and institutional investors. As […]
Types of For Sale Securities and Their Accounting Treatment (AFS/HTM/HFT)
Have you wondered what all those assets on an insurance company’s balance sheet were? Or why do companies carry such a large mix of marketable securities? Did you know that Microsoft owns over $120 billion in short-term investments, over 70% of its current assets, and over 39% of its total assets? That is a large […]
Changes in Working Capital: An Easy Walk Through
Updated 5/29/2023 Changes in working capital help explain how a company uses its assets to generate growth. Some companies build up inventories, pay down liabilities, or extend their repayments to vendors to growt their cash flows. The better we understand how a company uses its assets and liabilities, the better we can predict changes in […]
