Comments by "" (@ThePlainBagel) on "Cash Flows Explained" video.

Very good point! The cash flow statement is certainly not immune to management's influence, thanks for highlighting!
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I’d have to disagree to an extent with this. Certainly, you run equity risk when you’re invested, but it’s not a greater fool situation if fundamentals support a higher value. As a shareholder, you get percentage claim to a company’s profits. If a stock is trading very high without supporting profitability, that is speculation, but just because a company keeps their dividend doesn’t mean their stock’s value isn’t supported. You can also have a company perform share buybacks, which is almost equivalent to a dividend payment but the investor doesn’t get the cash payment, instead their share value increases by an equivalent amount. Sure, that amount is still at risk, but it’s no different than receiving a dividend and reinvesting it into the company, in fact it has a tax advantage. On top of all of that, a share’s value is backed by the assets of a company; if the company shuts down tomorrow, you get compensated by the proceeds that come from the assets. Obviously, there’s a whole bunch of risk here, but it’s not like the shares don’t represent anything
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The 29% statistic is misleading. The dividend return is assuming reinvestment into the stock, and the resulting compounding of the price/dividend. It's not that 71% of stocks don't earn a price return.
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Share buybacks do benefit shareholders, that statement is simply not correct. For the company, it is the exact same as paying a dividend, so the firm doesn't benefit from the payout. For investors, it also offers a similar benefit, and you can simply decide to sell a portion of your share if you want cash instead. They are theoretically equivalent transactions. I'd be interested where the 29% figure is from, and what stocks it's looking at (if it includes all start ups which many investors don't partake in, it's very misleading of average returns). Investors who hold an S&P500 position have earned remarkable PRICE returns over the past 40 years. Again, the price of a stock is not fundamentally 0. Take a real estate company. I'm sure you agree that houses hold tangible value that should increase over time as population grows (if not, let me know, that's a core assumption here). A real estate company buys and operates real estate. As a shareholder, you have a tangible claim to a percentage value of those buildings. As they go up in value, so too does your claim. In this circumstance, it should be easy to see that the stock has fundamental value; it's equivalent to you and your friends meeting up, splitting the costs of a house, and hiring someone to manage it. Even if you and your friends never take a dividend and just use the money to buy more buildings, your shares are certainly not worthless.
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@theoutliers6915 re-reading your question, I may not have addressed it. Yes, the money comes from their bank account, but let's say they have $1B in their bank account. They might announce that they'll buyback $3B worth of shares. It doesn't occur all at once, but throughout the year they'll use money in their bank account (and the money they make, say they make $3B in profits) to buyback the shares on the market. If shares are worth $100 each, then that means they're buying back 30 million units. They may have 1 billion units outstanding, but the buyback still helps.
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I use Adobe Premiere for both my video editing and my animations; it's probably not the most efficient approach but it works for me!
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I haven’t looked but yes it’s very luckily, especially because they are reporting negative earnings. That being said, most start ups have negative FCF for a while, so as long as they eventually achieve positive (and consistent) FCF, they may still stand as a viable investment. It’s up to investors to determine whether that’s likely or not!
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Hi there! You don't have to sell your share to the company; the idea is that they by shares on the market from investors who are selling, and that improves the value of the shares held be ongoing investors. Think of it as if they are paying off "debts," something that means you'll get a claim to more of their money moving forward. Hope that clears things up!
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@theoutliers6915 Yes you have claim to the company's cash, but in a situation where your stock is worth $100, you might have claim to $1-$5. So you are still net receiving more cash than your claim to the company's cash (which is possible because the company is not buying all of its shares at once). Your percentage claim to a company's cash is also not really where the value of a stock lies. The value is the cash generating capabilities of the firm, so while a company might pay cash this year (some of which theoretically belongs to you), it will produce more cash next year and the year after, so you don't lose value from the buyback. It's a confusing concept, but the company is just using open market operations to buy its shares back. Some old school investors believe a company should pay back the net asset value of a stock (i.e. an investor's $ claim over the company's assets) with a buyback, but sometimes stock prices trade lower than this amount, and so long as investors are willing to sell at that price companies will continue to buy back their shares at a discount, to the benefit of other investors.
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It’s information on insiders who are trading. It’s not illegal for an insider to buy or sell, but they have to go through pretty extensive reporting to do so to prove they aren’t doing so on material information not known by the public. That’s why their transactions can be tracked. To clarify, wallmine doesn’t offer insider tips :P the wording is just a little misleading
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It's hard to say without a deeper dive into their balance sheet/income statement, but that would suggest that the company is reporting more income than it's actually seeing in free cash flows. This may be because the company has high capital expenditures, or because the company is not actually collecting a lot of its revenue (they are non-cash or are going to an accounts receivable). Hope this helps!
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You can think of cash flow (specifically operating cash flow) as an alternative measure of profit. In a perfect world, net income and cash flow would equal one another, but accounting rules allow a lot of non-cash revenues and expenses to effect net income. Cash flow is roughly the same measure of net income but with a focus exclusively on actual cash paid and received. Hope that clears things up!
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@UmTheMuse Share buybacks are quite common, more so for mature businesses. The number of shares purchased isn't usually as readily available as dividends because there's no easy to digest per share measure; instead, management will indicate how many shares they bought and how much they spent doing so in their filings. I find it easiest just to look at a company's share count over time to see how it's changed. Regarding your point on real estate, I wouldn't say that buildings depreciate in the same way as vehicles. Certain aspects of a building surely require maintenance (i.e. water heater, AC system), but the structure of the building isn't losing value (unless you have something like water damage). So typically a house will still increase in value over time because the structure exists in a space that is becoming more scarce, and assuming the building is properly maintained, the increases in value should offset the costs of maintenance. This is why many analysts look at a real estate company's AFFO numbers (adjusted funds from operations) instead of earnings because AFFO switches out depreciation for money actually spent on the property. Many managers found that depreciation over stated the deterioration of their properties.
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I'm not sure if money flow has a set-in-stone definition but I would assume the two are synonymous
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+ve/-ve are just shorthand for positive and negative! Yes OCF and CFO are the same (I think OCF is used instead more commonly because CFO also stands for Chief Financial Officer). Capex and CFI are similar, but Capex is just a cost; it's how much the company has invested in assets. CFI includes both costs and gains from investing in assets (like Capex) but also gains from selling assets. Hope that clears things up!
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There should be a "closed caption" option you can select when watching the video to add subtitles
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They're trash
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It's literally cash on hand the company receives and spends, versus accounting profit. A company might report a profit but not have actually received the cash from their operations (so $0 cash flow) because the customer hasn't paid yet despite the job having been completed. Conversely, a company may have not EARNED any money ($0 profit) but may have received an advanced payment or something like that, which would mean they have received cash flow. That's the quick-and-dirty of it.
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With FCF, we’re trying to figure out what a business is able to produce from operations. The figure represents the money available to the stakeholders (“free” as in available and not committed to a liability). The financing cash flows can sort of be viewed as what’s done with the FCF (ie is it paid back to bond holders or shareholders?). Hope that clears it up!
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FCFE if you’re valuing the stock, FCF if you’re valuing the enterprise! As a shareholder you only care about the FCF after it’s paid off debts (so FCFE) because you don’t get the debt money
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Hi Miguel, that would happen if the company had non-cash losses. For example, if your business earned a profit (and cash flow), but it's asset valuation drop (if you wanted to liquidate your assets, you could not get back as much as you paid for your equipment; this could happen if markets become unfavourable), then you would have to realize a non-cash loss to reflect the loss of value. Technically you haven't lost any money, but accounting rules require you to report the loss in the value of your assets as though you had sold your assets at a loss.
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The two won't equal each other because they are measuring different things. Earnings include things like depreciation that aren't included in ANY of the cash flow numbers. Hope that clears things up!
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Capex strictly refers to expenditures so it actually can't be positive, so you'll never see a FCF higher than operating cash flow
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Operating income is sometimes used as a ROUGH estimate of cash flows, but the two are distinct measures. Operating cash flow is basically net income before the deduction of non-operating expenses (i.e. one off costs). There will still be non-cash items in that calculation though, and cash flows deal only with explicit cash items. Hope that clears it up!
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@gilgamesh310 Expenses are shown when they're first bought in the cash flow statement. Think of it like the company's bank account statement - if they paid for it, it will be on the cash flow statement. The income statement is a bit more finicky and uses assumptions, estimates and other figures that smooth certain expenses over time (through things like depreciation, as you highlighted).
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