Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
In the second quarter of 2011, nonfinancial companies in the Standard & Poor's 500-stock index generated $158 billion in cash flow from their operations after accounting for capital spending, a 13.6% increase from a year earlier, according to data gathered by S&P Capital IQ.
The figure also represents a 60.4% increase from the first quarter of 2009, a recent low, as companies navigated the depths of the recession.
That improvement is a testament to the pains U.S. companies have been taking to ensure their cash is coming in more quickly than it's going out.
The ability to generate cash may be the most important measure of a business's health.
Plenty of companies with paper profits have failed because they lacked the cash to keep operating.
At the most basic level, companies improve cash flow by collecting receivables more quickly and paying bills more slowly. If money is going out faster than it's coming in, a company must find a way to fund operations for those days in between.
The choices include cash on hand, bank financing or funds raised in the capital markets. The recent credit crunch threatened to stall even profitable companies because it left the latter two options so badly impaired.
One advantage to tracking cash flow from operations is that it has a clear accounting definition. That means it can be compared on an apples-to-apples basis from company to company.
Cash flow can also serve as the basis for calculating the corporate equivalent of disposable income. Subtracting capital expenditures—or critical investments in things like plants and machinery—from a company's cash flow shows how much of its resources are left available for such purposes as paying dividends, financing buybacks, making acquisition or funding other investments.