Re-creating the cash flow
Analysis beyond the P&L and the Balance Sheet is a must if we have to take a long term view of any company. I am not referring to fundamental or technical factors, but to more number work based on the published accounts. I am referring to the cash flow. My approach is different from what most textbooks would prescribe. Statutorily the accounts do carry something called the ‘funds flow’. That is not what I mean when I talk about ‘cash flow’. In the past, during a few of my presentations, I have taken up some analytical work on companies like Sintex, ABG Heavy Industries where a reconstruction of the cash flow showed that the story was vastly different from what the EPS and the PE numbers were telling. A solid cash flow analysis can tell us what the health of the business is and based on what current and likely future trends are, what would be the outcome.
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