Financial Statement Red Flags Ten Warning Signals Every Analyst Should Know What a Red Flag Really Means A red flag is not proof of fraud or manipulation. It is a signal that tells the analyst: “Look deeper.” A smart investor does not merely ask: “Is the company making a profit?” The better questions are: Financial
DECODING FINANCIAL STATEMENTS Read More »
A Comprehensive Ratio Analysis from the Perspective of Different Stakeholders THE BACKSTORY Company Profile GoodLuck Ltd. is a medium-sized manufacturing company producing engineering components for domestic and industrial customers. Over the past few years, it has expanded production capacity by investing in new machinery and infrastructure. Sales have grown steadily — but the Board of
Financial Statement Analysis of GoodLuck Ltd. Read More »
Having examined the funding side of the Balance Sheet in our last blog, it is equally important to understand how these funds are deployed within the business. This tells us that whatever funds a business raises—whether from owners (equity) or borrowings (debt) must be fully utilised in acquiring assets. But the real question is: how
Understanding the Asset Side: Linking Investment Decisions with Financial Ratios Read More »
When we analyze the liability side of the Balance Sheet, we are essentially looking at the sources of funds—primarily shareholders’ equity and borrowings. However, the Balance Sheet presents only a snapshot at a point in time. To truly understand how these funds are raised, repaid, or managed over a period, we must look beyond and
Understanding the Funding Side of the Balance Sheet: A Gateway to Connected Ratio Read More »
In today’s competitive business environment, companies frequently rely on external financing to support expansion, manage working capital, or undertake capital-intensive projects. Financial institutions, however, do not extend credit based solely on growth prospects—they closely evaluate a company’s financial stability and repayment capacity before making lending decisions. Two of the most critical metrics in this evaluation
Debt–Equity & Interest Coverage Ratio: Linking Lending Decisions with Ind AS 23 Read More »
Lending institutions use this ratio as a key measure of a company’s ability to pay off the principal and interest on a loan. Before granting a loan, the bank will calculate your company’s debt service coverage ratio. If it’s good, the bank will consider that you should be able to meet your repayment obligations. If
Understanding Debt Service Coverage Ratio (DSCR) from a Lending Perspective Read More »
Net Present Value (NPV) and Internal Rate of Return (IRR) are two fundamental tools used to evaluate a project’s profitability. NPV is an absolute measure of the difference between the present value of cash inflows and the present value of cash outflows over a specific period of time. It considers the time value of money, which
NPV and IRR in Capital Investment and Financing Decisions Read More »
Present Value (PV) and Discounted Cash Flow (DCF) are terms we frequently hear in the financial world. They are widely used in corporate finance, banking, valuation, and even personal investment planning. But why are they so important? Let us begin with a very simple question. Suppose you invest in an LIC policy today and receive
Discounted Cash Flow and Present Value in Investment Decisions Read More »
The Capital Asset Pricing Model (CAPM) is an equation that describes the relationship between the expected return of an investment and its risk. CAPM quantifies investment risk through beta, allowing investors to compare the volatility of an asset to the market. If you need to clear your concept of CAPM, let’s go through this classroom
Understanding CAPM in the World of Returns and Wealth Building Read More »
Cost of Capital is the minimum rate of return or profit a company must earn. It is extremely important to investors and analysts. It’s the cost of obtaining funds, whether through equity or debt and includes the returns expected by shareholders and the interest expenses on debt. Companies look for the optimal mix of financing that provides adequate funding and minimizes the
Cost of Capital and EVA: Tools for Strategic Financial Decisions Read More »
