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Counterpoint Global Insights Categorizing for Clarity Cash Flow Statement Adjustments to Improve Insight Investing CONSILIENT OBSERVER | October 6, 2021 Introduction You can think about a business using some simple ideas. A company spends money on investments that are expected to generate good returns relative to the capital’s opportunity cost. It then sells a good or service to customers that generates revenues and incurs expenses. The difference between revenues and costs is operating income, and after financing costs and taxes a company is left with net income. When income exceeds investments, the company generates cash that it can return to the capital providers. When investments exceed income, the company has to raise capital, usually by issuing debt or equity. The objective of financial statements is to help investors, creditors, and other interested parties understand the business. Financial statements are intended to be relevant and to have predictive value.1 In standard financ...